Preamble

The House met at half-past Eleven o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

PRIVATE BUSINESS

BAXI PARTNERSHIP LIMITED TRUST BILL [Lords]

Considered; amendments agreed to; to be read the Third time.

BILL PRESENTED

COMHAIRLE NAN EILEAN SIAR (ERISKAY CAUSEWAY) ORDER CONFIRMATION BILL

Mr. Secretary Reid presented a Bill to confirm a Provisional Order under section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Comhairle Nan Eilean Siar (Eriskay Causeway): and the same was read the First time; and ordered to be read a Second time, and to be printed [Bill 52].

Oral Answers to Questions — TRADE AND INDUSTRY

The Secretary of State was asked—

Regulation

Mr. John Bercow: What recent discussions he has had with representatives of business about the regulatory burden on industry and commerce. [105749]

The Minister for Trade (Mr. Richard Caborn): Regulation is one of the many issues that I discuss as part of my regular contacts with business.

Mr. Bercow: I thank the right hon. Gentleman for that spectacularly uninformative reply. Given that Labour has spewed forth more than 2,700 new regulations since 1 May 1997, adding £5,000 a year to the costs of the average small business, and that the number of business failures has soared by more than 20 per cent.—

Madam Speaker: Order. I require questions, not explanations of questions.

Mr. Bercow: Will the right hon. Gentleman tell us now in which year Labour intends to honour its promise to stop lacerating small businesses and start liberating them?

Mr. Caborn: We do that every year. The hon. Gentleman's tirade does not match the information in the

Organisation for Economic Co-operation and Development "Economic Outlook" published last month, which said that the United Kingdom had fewer economic and administrative regulations than any other OECD country including the United States. That report covered 1998. Less than 5 per cent. of all regulations affect business.

Mr. Barry Sheerman: Does my right hon. Friend agree that the Opposition should start growing up when they talk about regulation? The Financial Services and Markets Bill, which is to be considered this afternoon, will do British commerce the power of good. Good regulation of the City of London means that we become an effective, better centre for international commerce. We have a good record—

Madam Speaker: Order. I mean to go on as I began: I want questions, not explanations. I am trying to get through more questions in the House. Was the hon. Gentleman asking a question?

Mr. Sheerman: Yes, Madam Speaker. Does my right hon. Gentleman agree that some regulation helps commerce and industry, and makes our economy profitable?

Mr. Caborn: My hon. Friend is absolutely right. His comments concur with the British Chambers of Commerce document, which reports on confidence in profitability and turnover, and claims that it is the strongest it has been for three years. That view is supported by the CBI and the Chartered Institute of Purchasing and Supply. That shows that we have a healthy economy. Business welcomes our action on regulation.

Mrs. Angela Browning: Will the right hon. Gentleman tell the House—in pounds sterling, not euros—by how much he intends to reduce the cost of regulation to business in this Parliament?

Mr. Caborn: We have strengthened the operations that existed when we took over from the previous Administration. We have a new panel of Ministers, which will consider regulation—[HON. MEMBERS: "How much?"] Indeed, if the previous Administration had implemented some of their taskforce's recommendations, the system would have been more effective. We have had to clear up that mess. The taskforce is chaired by Lord Haskins and its members include David Irwin—[HON. MEMBERS: "How much?"] Madam Speaker, I am trying to show what the previous Administration did, and what we are doing about the 5 per cent. of regulations that affect business. If the Conservative party returned to power, would it remove from the statute book the regulations on the minimum wage or working hours?

E-Communications

Mr. David Stewart: What plans he has to ensure the confidentiality of encrypted material in electronic communications. [105750]

The Minister for Small Business and E-Commerce (Ms Patricia Hewitt): On Tuesday, the House gave an unopposed Third Reading to the Electronic Communications Bill, which will promote cryptography support services that guarantee the confidentiality of electronic transactions.

Mr. Stewart: Does the Minister share my view that the growth of e-commerce is immense, and has tremendous potential? Does she further agree that the constraint on its development is security for individuals and for business, and that cryptography exists? Does she agree that we must ensure maximum security for commercial transmissions through e-commerce?

Ms Hewitt: I entirely agree. That is why we are working with the Alliance for Electronic Business to put in place the T scheme to help give companies and individuals the assurance that they need about the security of electronic transactions.

Mr. Ian Bruce: I congratulate the Minister on the fact that it has only taken the Government three years to decide not to include in the Electronic Communications Bill the provisions on encryption, and on taking Conservative Members' advice about that. Will she assure the House that, as she has wisely not included those provisions in the Electronic Communications Bill, she will tell her colleagues in the Home Office to do the same in the measure on interception?

Ms Hewitt: The previous Administration, whom the hon. Gentleman supported, made the proposal for mandatory key escrow. We refused to introduce that and have ruled it out from the Bill. On law enforcement, encryption—which protects all our credit card details, for example—also enables money launderers, paedophiles and other criminals to evade detection. My right hon. Friend the Home Secretary will be making proposals to ensure that when the police have the power to seize information they can get it quite properly, either in plain text or with the key to decode it.

Mr. Alan Duncan: Further to the question of my hon. Friend the Member for South Dorset (Mr. Bruce), will the Minister explain which aspects of confidentiality will fall within her responsibilities and which will fall within those of the Home Office? Now that the e-envoy is at his desk at last—we welcome him to his new job—may I ask to whom he will report on such matters? Exactly what are his responsibilities; what is his job description; and what is he expected to achieve?

Ms Hewitt: The e-envoy's responsibilities are set out extremely clearly on his website, which I recommend the hon. Gentleman visits. He has responsibility as the lead official in Whitehall for co-ordinating across government our efforts to make the United Kingdom the best place in the world for e-commerce. My role is that of lead Minister in co-ordinating that work across government.

Ice-cream (Impulse Buying)

Mr. Bob Russell: On what date he received the Competition Commission's inquiry into the impulse buying ice-cream industry; and when he intends to publish its findings. [105751]

The Minister for Energy and Competitiveness in Europe (Mrs. Helen Liddell): My right hon. Friend the Secretary of State for Trade and Industry received a copy of the Competition Commission's report on the supply of impulse ice-cream on 21 September. It will be published as soon as is practicable.

Mr. Russell: That is not a helpful response for the independents in the ice-cream distribution industry who have been waiting months for the report, which has been completed. I have one such distributor in my constituency. What message can I take back to that gentleman—the appropriately named Mr. D. Frost—whose business is suffering? Does the Minister agree that the Wall's stranglehold is anti-competitive and not in the interests of consumers and retailers?

Mrs. Liddell: I am sorry that the hon. Gentleman finds my reply unhelpful, but it is the only one I can give. I am sure he is well aware that a number of companies in the ice-cream market are publicly quoted and I therefore cannot give any indication in the House on market-sensitive matters. The publication of the report is market sensitive. The Government are well aware of the difficulties, and I congratulate him on his endeavours, but he should know that it is not in the interests of the ice-cream industry to make statements in the House that could destabilise the market.

Mr. David Drew: Much as I would welcome the publication of the report, does my right hon. Friend agree that there will be major repercussions for British jobs and the way in which customers perceive their ice-cream? There is no reason why we cannot have stability in the market, even though we need the report to be published as soon as possible.

Mrs. Liddell: My hon. Friend makes a good point. He, too, has been vociferous on the matter, and all his points will be taken into account when the report is published.

Mr. Nick Gibb: Under the Competition Act 1998, a company can be fined up to 10 per cent. of its annual turnover. Out of the blue last August, the Government announced that that could apply to three years' annual turnover, effectively tripling the fine to 30 per cent. Was that always their intention, before and during the passage of the 1998 Act, or is it a new policy departure?

Mrs. Liddell: In all their deliberations on competition, the Government take into account best practice and the best possible conclusions that we can reach to achieve a truly competitive market. The hon. Gentleman of all people should know that it is very important to ensure that adequate and proper competition is in place in the United Kingdom.

Minimum Wage

Mr. Gordon Prentice: How many people have contacted the minimum wage hotline since it was inaugurated. [105752]

The Secretary of State for Trade and Industry (Mr. Stephen Byers): There have been 150,000 calls to the national minimum wage hotline.

Mr. Prentice: I suspect that a good number of that 150,000 came from Pendle and north-east Lancashire which is a low-pay black spot. Is the Secretary of State aware that when the national minimum wage came in last April, 8 per cent. of all adults in employment in Pendle received a pay increase, as did no fewer than 30 per cent. of all part-time women employees? Not only did that have huge practical importance: for the Labour party and the Labour Government it had huge symbolic importance. Will the Secretary of State let us know whether there will be an annual uprating of the national minimum wage which people in my constituency and across the land fully expect?

Mr. Byers: I am delighted to hear that so many workers in my hon. Friend's constituency have benefited from the introduction of the national minimum wage. The important message that we can both put over to them is that they stand to lose that if the Conservative party is ever returned to office. In answer to his question, the Government have made it clear throughout that it is not their policy automatically to uprate the national minimum wage annually. Any increase will need to be considered in the light of the economic conditions at a particular time. I know that this cautious approach will be criticised in some quarters, but it is important that this radical change in the labour market is introduced successfully—as it has been. We must not take any steps which will disadvantage its successful introduction.

Dr. Vincent Cable: Does the Secretary of State agree that despite reservations expressed about the national minimum wage, by me among other people, it has proved to be a success and has been accepted as such across industry? In the same spirit of consensus, will he agree that there needs to be a mechanism for increasing the minimum wage at least in line with inflation over the past two years and for removing discrimination against younger workers aged between 18 and 22?

Mr. Byers: I welcome the Liberal Democrats' decision on the minimum wage. They described their own policy as being economically illiterate and politically inept, and that was absolutely right. Their policy was exactly that, in line with many of the policies that they pursue. The hon. Gentleman, who opposed the national minimum wage and the way it was introduced, is now calling for an annual uprating. It is important to remember that the national minimum wage is not a state benefit. It is paying people for work. That means that an increase will be linked to the economic circumstances of the day. It has made a break with state benefits, which are annually

uprated. The minimum wage is about making work pay for people. That is exactly what we are doing and what we will continue to do.

Mrs. Alice Mahon: While I congratulate the Government on introducing the minimum wage, does my right hon. Friend agree that £3.60 an hour is too low? In view of the profits of various companies and the fat-cat increases, does he accept that it is time to increase the minimum wage and link it into a mechanism where it is increased annually, at least in line with the rate of inflation? I suggest that it should go up to £5 an hour.

Mr. Byers: An increase from £3.60 to £5 an hour would be an increase rather in excess of the rate of inflation. I know that my hon. Friend has been a powerful advocate of the minimum wage for many years—and in the years when it may not have been so fashionable to support it. The Low Pay Commission was kept in being after it made its first recommendations partly to monitor continually the impact of the national minimum wage on the labour market, and levels of employment in particular. It has just reported to the Government and we are considering our response, which we hope to make in the next few weeks. We will undoubtedly need to consider the questions of uprating and the youth rate.

Mr. Nick St. Aubyn: We know from previous answers that thousands of people have gone from low pay to no pay as a result of the Government's policies. Does the Secretary of State regard the thousands of people who have lost their jobs as a result of the minimum wage legislation as a sign of the success or failure of his Government's policy?

Mr. Byers: As usual, the hon. Gentleman is allowing his prejudices to get in the way of the facts, which are that there is higher employment in this country than ever before and that our introduction of the national minimum wage has taken well over 1.5 million people out of poverty pay. All that would be put at risk by the policies that his party pursues.

Debts (Late Payment)

Mr. Desmond Browne: If he will make a statement about the use by businesses of the Late Payment of Commercial Debts (Interest) Act 1998. [105753]

The Minister for Small Business and E-Commerce (Ms Patricia Hewitt): The latest review of credit management activity shows that 5 per cent. of firms have already used the legislation—up from 3 per cent. six months ago—and that 11 per cent. are planning to use it.

Mr. Browne: Does my hon. Friend have any reliable survey evidence to show that there has been any improvement in Britain's historically lamentable payment culture since 1 November 1998, when the Act came into force?

Ms Hewitt: There are several surveys, not all of them consistent. I am glad to say that the survey by Dunn and Bradstreet, one of the most comprehensive, shows that 60 per cent. of companies are paying on time, compared


with only 54 per cent. in 1997. That has taken us up to third place in the European Union league table on payment of debts. It is still not good enough, but we are going in the right direction.

Mr. Nigel Evans: Has the Minister been able to do a survey or analysis of the sort of businesses that are using the legislation? What percentage of small businesses are using the legislation against other small businesses that are late in paying their debts?

Ms Hewitt: I think the hon. Gentleman does not entirely understand the legislation. As currently in force, it allows small businesses to pursue large businesses because that is the real problem that we identified and set out to put right. The introduction of the rest of the law is being phased. The intention is that, from 1 November this year, small businesses will be able to use the law against other small businesses, and that, from 1 November 2002, all businesses and public sector organisations will be able to use the law, but we continue to keep those phasing arrangements under review.

Mr. Brian Cotter: Does the Minister agree that the Government should take a lead in promoting early payment of debt, and that it is regrettable that the Bill did not reflect that? Will she provide us with statistics showing the Government's record at both local and national level?

Ms Hewitt: Of course Government must take a lead and that is what we are doing. Every Government Department has signed up to the better payment practice code. Most paid almost 97 per cent. of their bills on time in the last financial year. The Department of Trade and Industry has substantially improved its payments record and my right hon. Friend the Secretary of State has asked officials to ensure that 100 per cent. of bills are paid on time.

Mail Order

Helen Jones: What recent discussions his Department has had with representatives of the mail order companies on consumer protection in that industry. [105754]

The Minister for Competitiveness (Mr. Alan Johnson): The Department has met representatives of the mail order industry to discuss consumer protection issues concerning implementation of the European directive on the protection of consumers in respect of distance contracts, and the proposals in the consumer White Paper relating to codes of practice.

Helen Jones: I thank my hon. Friend for that reply. Not only do many hon. Members shop by mail order because of lack of time, but, more important, many of my poorer constituents do so because it is the only way in which they can phase payments. There are many good mail order companies, but in dealing with some of them, people may encounter particular problems in arranging deliveries and making complaints: people often cannot get hold of anyone in a responsible position to deal with the matter that they wish to raise. Will my hon. Friend assure

me that, in future discussions, he will raise those topics with the mail order companies, so that our poorer constituents will be entitled to better protection?

Mr. Johnson: My hon. Friend raises an important point. One of the reasons for introducing better consumer protection in the sector is that, although the vast majority of mail order companies behave in an exemplary manner, the most vulnerable people are sometimes exploited by a small minority. I will take her views into account and pass on to her the response of the Mail Order Traders Association of Great Britain next time we meet, but I remind her that we are consulting on the implementation regulations until 11 February. All submissions will be gratefully received.

Mr. Michael Fabricant: Does the Minister accept that it is possible to receive junk mail not only through the post but by fax? What about introducing some consumer protection for the poor guy who owns the fax machine and ends up having to pay for the paper, the toner and everything else? What about some protection for hon. Members who return home to discover on the floor at least 200 yards of fax paper containing useless junk that has been faxed to us? We need such protection, too.

Mr. Johnson: The hon. Gentleman's remarks strike a chord throughout the House. I remind him that the consultation that I mentioned earlier, on the European directive on distance selling, includes measures to ensure that people have a statutory right to choose whether to receive advertising mail, regardless of whether it is sent by e-mail, the post or fax. As I said, the consultation period finishes on 11 February.

Debts (Late Payment)

Mr. Kerry Pollard: What plans he has to strengthen legislation on the late payment of commercial debts in respect of its impact on small businesses. [105755]

The Minister for Small Business and E-Commerce (Ms Patricia Hewitt): I am keeping the impact of the new law under close review, but currently we have no plans to amend it.

Mr. Pollard: I thank the Minister for that answer. Does she support the European Union late payment directive, which allows the recovery of costs associated with the collection of commercial debts? Will she support domestic legislation on the matter?

Ms Hewitt: We do indeed support the principle of the proposed directive, but we and some other member states are concerned that its scope is too broad. We are working together to sort that out. We have provision in current UK law to allow individuals to recover costs through county court proceedings.

Mr. Andrew Robathan: Coming as she does from Leicestershire, is the Minister aware of the impact on small businesses in our area of the failure to pay and late payment of commercial debt by a company called


TransTec, in Coventry? Will she now answer the parliamentary questions tabled, more than two weeks ago, by me and other hon. Members?

Ms Hewitt: Those questions have already been fully answered. The investigations are proceeding and will be dealt with in due course in the normal way.

Poor Countries (Exports)

Joan Ruddock: What progress he has made in persuading the UK's EU partners to fulfil their commitment to allow tariff- and quota-free access for all exports from the world's 48 poorest countries. [105756]

The Minister for Trade (Mr. Richard Caborn): The European Union commitment is to provide duty-free access for essentially all products from the least-developed countries by 2005 at the latest. We expect the European Commission soon to make proposals aimed at implementing that commitment, giving both tariff- and quota-free access. More generally, the Government will continue to call for zero tariffs to be applied to all goods from the least-developed countries, as my right hon. Friend the Prime Minister promised in his speech at the Mansion House on 22 November 1999.

Joan Ruddock: I thank my right hon. Friend for that reply. Does he agree that tariff- and quota-free market access for the poorest countries should include all exports, and that there should not be exclusions on the grounds of any sensitivity? Does he also agree that there is no reason why those small concessions could not be made immediately, and that there should be no attempt to include them in any further trade rounds?

Mr. Caborn: That is exactly the British Government's position and what we are trying to negotiate with the European Union. As I said, the Prime Minister stated the British Government's position on the issue in his Mansion House speech, and we have to convince our European Union partners to accept that position. Arguably, however, the European Union already offers probably the most generous preferential terms for developing countries. Nevertheless, I agree with my hon. Friend that we have to go that extra mile, and we shall be pushing very hard to do just that.

Mr. Peter Lilley: Does the Minister agree that by far the best way of helping poor countries out of poverty is to enable them freely to export their goods to our markets? Will he condemn those who weep crocodile tears for the poorest countries, but spend all their time dreaming up ways of restricting their imports into the countries of the developed world on grounds that free trade is not in their view fair trade?

Mr. Caborn: Yes. The Government's commitment on tariffs and quotas has been laid out by the Prime Minister, and my right hon. Friend the Chancellor of the Exchequer has been working with the International Monetary Fund on trying to relieve the debt of the heavily indebted countries. We want to ensure that the least-developed countries have sustainable economies, and one of the

prerequisites in achieving that is to provide those countries with access to markets such as the European Union.

Coal Industry

Mr. John Grogan: If he will make a statement on the future of the coal industry. [105757]

The Secretary of State for Trade and Industry (Mr. Stephen Byers): We are introducing reforms to the electricity market to remove distortions that worked against coal generation. The new electricity trading arrangements in the Utilities Bill published last week will change the way in which the generation market operates, with credit being given to coal for the flexibility that it offers to the system. In 1997, the industry asked for fairness not favours. That has been, and will continue to be, our approach.

Mr. Grogan: Given the huge subsidies currently paid by the German, Spanish and French Governments to support their coal industries, will the Minister establish, with the European Union, which state aids might legally be payable to support the British coal industry? Is not a diverse energy portfolio in the interests of both Britain and Europe as a whole?

Mr. Byers: My hon. Friend raises an important issue. First, we must study carefully the level of state aids given by other European Union member states to ensure that they do not achieve an unfair advantage. I know that my hon. Friend has considered very carefully the aid that the UK Government can give to the coal industry. He will know that the Government do not consider that we have the power to offer aid for operating costs, because of decisions taken by the previous Administration. However, given our concern about the coal industry, the Government will look closely at any alternative opinion.

Mr. Owen Paterson: If the Government lifted the moratorium on gas-fired power stations, how many coal mines in this country would remain competitive?

Mr. Byers: I said that our intention was to introduce fairness not favours. Our aim is to make the energy market fair. To achieve that, we are introducing changes through the Utilities Bill. However, we have introduced a stricter gas consents policy to protect industries in the energy sector that would be affected adversely by the fact that we do not at present have fair competition.

Mr. Eric Illsley: May I urge my right hon. Friend to maintain the consents policy for gas-fired power generation? If that policy were relaxed, there would be another dash for gas and more consents would be issued for gas-fired power generation. That would wipe out what remains of the British coal industry. My right hon. Friend is correct to insist on a fair energy policy.

Mr. Byers: Given his personal and constituency experience, my hon. Friend is a powerful advocate for the coal industry. We have put in place the stricter gas consents policy so that we can make the changes


contained in the Utilities Bill to secure a level and fair playing field for energy generation, which we do not have at the moment. Until we achieve that, the stricter gas consents policy will remain in place.

British Nuclear Fuels

Mr. David Chaytor: If he has decided on a process and a time scale for the privatisation of British Nuclear Fuels plc. [105758]

The Minister for Energy and Competitiveness in Europe (Mrs. Helen Liddell): On July 13 last year, my right hon. Friend the Secretary of State said that the Government were looking to introduce a public-private partnership into BNFL before the end of the current Parliament, subject to BNFL's overall progress towards achieving a range of performance targets, as well as to further work by the Department and our advisers.

Mr. Chaytor: When the Government are in a position to clarify the way forward for BNFL, does my hon. Friend agree that, given the size and sensitivity of the operation, there needs to be a full public debate about all possible ways forward for the nuclear industry, and for BNFL in particular? Does she also agree that that debate must be underpinned by the principles of open government, transparency and full freedom of information?

Mrs. Liddell: I very much concur about the need for an open debate on the issues connected with BNFL and the public-private partnership. The Government have chosen to study the option of a public-private partnership because there are great international opportunities for BNFL, as is evident in the acquisition strategy involving Westinghouse and ABB. However, it is important that BNFL meet certain targets. The PPP will ensure that BNFL can benefit from commercial freedom, and from commercial disciplines.
It is important that we have transparency of information, and that people join with the Government, and, indeed with the trade unions and management of BNFL, in looking at the international opportunities for British Nuclear Fuels to become market leaders.

Mr. Michael Jack: In the light of the Minister's answer, it is evident that the Government remain the dominant shareholder in BNFL. Therefore, may I ask the Minister what discussions she has had with the board of BNFL about increasing its role in terms of nuclear power generation? As I understand it, closing one sixth of a major coal-fired power station saves the amount of carbon dioxide required by the climate change levy. More work in generating electricity by nuclear means could save us all an awful lot of trouble.

Mrs. Liddell: The right hon. Gentleman makes an interesting point, but we have to see nuclear generation within the context of a balanced energy supply. My right hon. Friend has just referred to the measures that the Government are taking to ensure that the coal industry can play its proper part in an electricity market that is not distorted. It is important to point out that BNFL, through its acquisitions strategy, can now enter into a much wider range of commercial activities. The US arm of BNFL, Westinghouse, is well able to participate internationally

in the very important field of nuclear power. This is a sound decision for the Government to take. There are many commercial opportunities that would expand the opportunities for BNFL and its international subsidiaries in a way that ensures that internationally we have a sustained and mixed energy supply, to give us security and diversity of supply into the future.

Mr. Dale Campbell-Savours: May we have an assurance that the performance targets to which my right hon. Friend refers include nuclear waste disposal targets, which affect my constituents, and that there will be no partnership and no progress until we have absolute assurances in those areas?

Mrs. Liddell: I can give my hon. Friend a guarantee on that. The issues surrounding nuclear waste and those connected with his constituency are much in our mind. We have set demanding targets for BNFL as we approach the public-private partnership. We wish to see those targets met, not just in commercial terms, but also in safety terms.

Mr. Jeffrey Donaldson: This is an issue that is very important to people in Northern Ireland. The Minister will be aware of concerns about pollution in the Irish sea emanating from the reprocessing plant at Sellafield. Can the Minister give us an assurance that, should the Department proceed with privatisation, there will be no reduction in safety standards or in effective regulation, so that we can prevent pollution in the Irish sea in the future?

Mrs. Liddell: The hon. Gentleman makes a point that he has made on a number of occasions. First, let me point out that this is not a privatisation; it is a genuine partnership, a public-private partnership, that has been accepted and welcomed across the board. Issues of public safety and pollution are very much at the heart of the nuclear industry. My colleagues in the Department of the Environment, Transport and the Regions are in the lead in relation to the environmental considerations, but I can assure the hon. Gentleman that the Department of Trade and Industry is most anxious to ensure that the PPP leads not only to the maintenance of safety and environmental standards, but to a continuing improvement in them.

Mr. Lindsay Hoyle: Will my right hon. Friend also ensure that we do not lose the highly successful training centre for apprentices at Springfield in Preston, which represents many industries—not just BNFL, but all the leading companies? There is a danger that through privatisation we may lose it. Can we ensure that that will not happen?

Mrs. Liddell: I stress again that this is not a privatisation. The aim of the public-private partnership is to develop BNFL as a centre of excellence. We believe there are substantial global opportunities for BNFL, which will require a highly trained work force. I would hope that throughout British Nuclear Fuels there would be an enhanced emphasis on training and skilling the work force to make sure that we are truly globally competitive. I pay tribute to the work that is done at Springfield in my hon. Friend's constituency.

Dairy Industry

Mrs. Ann Winterton: If he will make a statement about competition in the dairy industry. [105759]

The Secretary of State for Trade and Industry (Mr. Stephen Byers): The members of Milk Marque have agreed to a voluntary separation into three independent successor bodies. I welcome that decision.

Mrs. Winterton: What research did the Department undertake into the impact of the break-up? It should be borne in mind that, by the time the decision was made, Milk Marque's share of the market had dropped considerably, and the statistics used were therefore out of date.

Mr. Byers: It would have been wholly inappropriate for my Department to intervene or to instruct a voluntary organisation such as Milk Marque. It was the members of Milk Marque who decided, voluntarily, to break into three successor bodies, in the light of the report by the Monopolies and Mergers Commission. I welcome that voluntary decision. I rejected the commission's recommendation for a break-up to be imposed on Milk Marque: I thought that it would be far better to leave the decision to its members. They have made their decision, and I look forward to healthy competition in the milk industry—and also to allowing processing in due course.

Mr. Elfyn Llwyd: The recent report caused great dismay. At present there is no real competition; the only competition seems to be competition to offer farmers the lowest possible prices. The market is depressed, as the right hon. Gentleman knows. Something must be done: we are losing hundreds of farmers a year in places like Ceredigion. I urge the Secretary of State to speak to his right hon. Friend the Minister of Agriculture, Fisheries and Food.

Mr. Byers: I will certainly do that, but the MMC report was such that the Government could not ignore it. I had to seek a remedy that was appropriate to the circumstances. I disagreed with the commission's recommendation for a compulsory break-up, but I am pleased that the members of Milk Marque considered the situation carefully and, on a voluntary basis, agreed to form three independent successor bodies. When they are competing effectively—I hope that there will be clear indications of that by April—I shall be able to allow them to start processing. That will enable them to produce products with a higher added value, which I think will make a real difference to the industry.

Mr. David Heath: The agreement was voluntary only in the sense that the action of someone with a shotgun pointed at his head is voluntary. Does the right hon. Gentleman realise that the long delay before his decision, and the disastrous effects on milk processing, are much resented in the dairy

industry? Next time he considers it necessary to meddle in agriculture, will he talk to the primary producers—the people who get up at 5 am to milk the cows, who are losing money hand over fist?

Mr. Byers: The hon. Gentleman talks of meddling in agriculture. What I did as Secretary of State for Trade and Industry was disagree with the MMC's proposal for a compulsory break-up, because I did not think that it was in the industry's best interests. Farmers have told me that that was absolutely the right decision. If the hon. Gentleman disagrees and thinks that I should have rubber-stamped the commission's report, let me tell him that I could easily have done that, but I did not; I put the industry's interests first.

Mrs. Angela Browning: The Secretary of State has repeated today things that he said at our last Trade and Industry Question Time. On 9 December 1999, he told me—and my hon. Friend the Member for North Shropshire (Mr. Paterson), who is present—
It is the members of Milk Marque who have voluntarily agreed to break it up into three successor bodies."—[Official Report, 9 December 1999; Vol. 340, c. 982.]
The right hon. Gentleman must know that, with viability in mind, the industry pressed repeatedly to be allowed to form two bodies, not three.

Mr. Byers: All I know is that the members of Milk Marque voted for three independent successor bodies. That is exactly what I said on 9 December, and have said again today.

Mrs. Browning: The members of Milk Marque were finally forced to accept that arrangement. After our last Question Time I wrote to the chairman of Milk Marque, who wrote back saying:
Contrary to the impression given by your letter, Milk Marque did not press for three regions rather than two; indeed when it became obvious that the way forward was for Milk Marque to split, our first proposal was a two-way split … the competition authorities insisted that three was the minimum acceptable number".
The Secretary of State will know that the matter is now the subject of a judicial review. Why did he not use his powers to help the industry, and why does he not give answers at the Dispatch Box that tell Members exactly what is behind the decision making?

Mr. Byers: The hon. Lady needs to be aware of the different responsibilities of the Secretary of State for Trade and Industry and the Competition Commission. I would be justifiably criticised if I intervened with the Competition Commission. I do not do that—perhaps the previous Government to which the hon. Lady belonged used to.
The correspondence between the Competition Commission and Milk Marque is a matter for those two bodies. I act in an independent capacity. But it is no secret that the MMC report said that between three and five would be an appropriate division. I decided that there will not be a compulsory break-up of Milk Marque, and that has been welcomed by the industry.

Trade Union Recognition

Mr. Vernon Coaker: What progress is being made in implementing the provisions of the Employment Relations Act 1999 relating to statutory trade union recognition. [105760]

The Minister for Competitiveness (Mr. Alan Johnson): The Government are making the necessary preparations to bring these provisions into force in the near future.

Mr. Coaker: May I urge my hon. Friend to bring the provisions into force as soon as possible? This is a radical piece of legislation, which is much needed. Workers in my constituency who are seeking to organise themselves on a trade union basis are looking forward to these measures. They need the strength of a trade union to protect themselves in the workplace.

Mr. Johnson: My hon. Friend can be assured that we will put the legislation in place as soon as possible. He will understand that major pieces of subordinate legislation are also necessary, including codes of practice on union access to workers during a ballot on recognition, and on the right of individuals to be accompanied to each discipline and grievance hearing. The Advisory, Conciliation and Arbitration Service is preparing those for us at present, and we shall need to consult on them. The important thing, as I know my hon. Friend will accept, is not the speed at which the measures will be introduced—although that is obviously an imperative—but to ensure that, once introduced, they are fair and balanced in accordance with the legislation.

Textile Industry

Mr. David Tredinnick: How many textile and clothing factories there are in (a) the north-east and (b) the east midlands; and if he will make a statement on the organisations which exist to promote economic development in each of those regions. [105761]

The Minister for Trade (Mr. Richard Caborn): There are 360 textile and clothing companies in the north-east and 3,106 textile and clothing companies in the east midlands. There are many separate organisations whose task it is to promote economic development in those regions, the most notable of which are the regional development agencies—One North East and the East Midlands development agency.

Mr. Tredinnick: Can the hon. Gentleman confirm that the textile and clothing strategy group has recently recommended that Government assistance beyond objective 2 area status be given to some companies in the east midlands? Secondly, does he not feel that now that there is an action plan for the north-east textiles industry, which was set up by his Department in December, something should be done on similar lines in the east midlands, given that that is where most of the companies are?

Mr. Caborn: That has been under active discussion between the Government offices and the newly formed regional development agencies, and it is to be welcomed.
Going over the boundaries of the assisted areas would be very difficult, as the hon. Gentleman knows, and would break the European Union rules on dispersal of structural funds money. However, he could have discussions with the regional development agencies on how they can assist the continued development of this important sector. I believe that they are trying to develop a cluster around the textiles and clothing industry in the east midlands, bringing in academia and other strands of financial support. A positive attitude has been taken in the region, which the Department welcomes.

Mr. Jim Cousins: May I congratulate the Government on their efforts in setting up a taskforce to look at the textile industry in the north-east of England? It is an excellent initiative. There is no future in protectionism, although some of us are concerned that the top management of companies such as Marks and Spencer appear to have callously sacrificed the jobs of British textile workers in an effort to save their own—which may well not work out for them.
Will my hon. Friend be willing to meet Members of Parliament from the north-east to see whether we can make progress on the action plan and taskforce? We want to take up the Government's policies to promote small businesses, assist them with taxation and get new products, design and technology into our industry to give it a long-term future.

Mr. Caborn: I fully agree with my hon. Friend. However, the new design and development will not be carried out in Departments—I can assure him of that: it will be done in the regions. The taskforce is operating in the north-east, with all the partners involved in a very creative way, and will deal with some of the questions raised by my hon. Friend.
Yes, I will meet the Members of Parliament and, indeed, any of the partners in the taskforce, but the solutions to the problems will be found in the regions—in that partnership—rather than in Whitehall.

Mr. Nicholas Winterton: I support the request made to the Government by my hon. Friend the Member for Bosworth (Mr. Tredinnick). Does the Minister agree that textiles and clothing are industries of strategic importance to the United Kingdom; that they remain substantial employers; and that they are frequently undermined by unfair competition? Is it not important that the existing systems for dealing with unfair competition should act more quickly than they currently do?

Mr. Caborn: The hon. Gentleman makes a justifiable point. Several of the procedures for reacting to what he describes as unfair competition need to be questioned. That is one of the matters that we are taking up with the World Trade Organisation, and I am taking it up in the European Union in other ways. The hon. Gentleman is right. There should be a review of our responses to such claims and allegations. Information technology could be used much more effectively than has been the case hitherto. I accept the hon. Gentleman's comments.

Mr. Andrew Reed: Areas such as Leicestershire have not secured objective 2 status or assisted area status, but still have a large number of textile jobs. What practical measures will my hon. Friend take to


work with the regional development agency? Will he also take a lead in the Government to ensure that those jobs are retained? A large number of jobs in the east midlands—especially in Leicestershire—still depend on the textile sector. We are keen that they should be retained.

Mr. Caborn: My hon. Friend is aware that a taskforce is operating in his area, as I have just pointed out. The taskforce is considering matters such as education, trade policy, export and industrial sponsorship. Such partnerships consider opportunities, nationally and internationally, in a changing world.
Many people realise that liberalisation of the global economy is taking place. We have to keep ahead of the game by retraining the work force, developing design and ensuring that academic institutions, as well as further education institutions, play a role in ensuring that we have the design skills and the skilled labour that are necessary to keep ahead in an extremely competitive market. The way forward lies in the partnerships between the regional development agencies, the Government offices and the partners in the regions.

Car Pricing

Mr. John M. Taylor: If he will make a statement on the pricing of cars in the UK and the rest of the EU. [105762]

The Minister for Energy and Competitiveness in Europe (Mrs. Helen Liddell): The European Commission publishes a six-monthly comparison of pre-tax prices across the European Community. The most recent one covered prices at 1 May 1999; the UK was the most expensive market for 62 of the 75 models covered. Publication of the survey of prices taken on 1 November 1999 is expected shortly.
The Competition Commission is currently investigating the supply of new cars in the UK; its report is due on 31 January. I have no doubt that the commission is looking at car prices as part of its investigation.

Mr. Taylor: Has the Minister stopped to think of the enhanced foreign car penetration of the west midlands car market that will be brought about by the damage to local component manufacturers through the collapse of TransTec?

Mrs. Liddell: My hon. Friend the Minister for Small Business and E-Commerce has already referred to matters connected to TransTec. However, I am sure that many people in the hon. Gentleman's constituency and throughout other areas that are dependent on the car industry will be interested to know how the Government are taking action to ensure that there will be a viable car industry in the future—hence our involvement with Rover BMW. We are trying to ensure that consumers have access to cars at prices that do not disadvantage them. At the same time, we are also ensuring that all the benefits from the single market in the EU are available to every UK consumer.

Mr. Richard Burden: My right hon. Friend may forgive me if I return to the question asked by the hon. Member for Solihull

(Mr. Taylor). Does she agree that while genuine concern about differential pricing across Europe continues, when the commission's report—which we await with interest—becomes available, it is important that it be considered quickly and that decisions be made promptly? The worst thing for consumers and the motor industry would be inordinate delay.

Mrs. Liddell: My hon. Friend makes a considered point on a subject of considerable interest—compared with the shallow attempt by the hon. Member for Solihull to use his question to suit the Tory Whips. We take speed of response very much into account and recognise the importance of the car industry in terms not just of primary manufacture but of components.

Business Competitiveness

Mr. Geraint Davies: What recent discussions he has had with other EU member states about improving the competitiveness of business. [105765]

The Minister for Energy and Competitiveness in Europe (Mrs. Helen Liddell): My ministerial colleagues and I have held regular discussions with our opposite numbers on a wide range of issues related to competitiveness, in bilateral meetings with member states and European Council meetings. We will intensify those contacts as we approach the Lisbon special European summit in March. That will be a significant summit for the United Kingdom because the issues are close to the heart of this Government as regards promoting a knowledge-driven economy, economic reform and ensuring that the advantages of the single market are enjoyed by all citizens of the European Union.

Mr. Davies: Manufacturing output in Britain is rising at its fastest rate since 1995, with particular success in computers, telephones, pharmaceuticals, chemicals and engineering—despite the level of sterling. In her discussions with our EU partners, will my right hon. Friend make it clear that the reason for our outstanding success is not just efficiency, added value and productivity, but a system of financial stability—as opposed to the boom-bust of the past—that gives certainty to the investment and export growth that is materialising?

Mrs. Liddell: My hon. Friend makes an excellent point. In my discussions with industrialists, they frequently mention the advantages of a sound and stable economy based on a prudent fiscal framework and on engaging with the European Union to secure the advantages of the markets that are so important to British manufacturing industry. Opposition Members who scaremonger about our membership of the European Union do no service to our manufacturing industry—which makes the point that our exports to non-European Union countries are as nothing compared with exports to our fellow member states.

Mr. Crispin Blunt: Does the Minister agree that it is difficult for businesses to be competitive if they


have their assets seized by the countries in which they have invested—particularly when those investments are protected by the GATT? Will the right hon. Lady instruct her officials to liaise with those from other European Union countries and EU institutions to ensure that the Department takes the fullest possible action to protect British investments—such as Wena Hotels Ltd, which had its assets seized in Egypt nearly 10 years ago?

Mrs. Liddell: One of the great benefits of membership of the European Union is that where domestic companies encounter significant difficulties, member states can act together. My officials, as part of the step change in relationships with other member states, are able to raise difficult issues and seek a resolution. I will take on board the hon. Gentleman's point. If he wishes to communicate with me further, I will be happy to respond.

Telecommunications

Mr. Mark Todd: If he will place obligations on telecommunications providers to increase the availability of broadband technologies in rural areas. [105766]

The Minister for Small Business and E-Commerce (Ms Patricia Hewitt): We want everyone to have access to affordable modern communications services. The market for broadband services is in the early stages of development and it would not be appropriate at this point to impose new service obligations.

Mr. Todd: A critical foundation for diversification will be access to broadband technologies in the development of IT-based and media-based industry activity. The availability of such technologies for those purposes and for leisure is crucially important. Does the Minister share the view that the position must be kept under careful review?

Ms Hewitt: I entirely agree with my hon. Friend. We are taking immediate steps to auction third-generation mobile telephony spectrum, and Oftel has agreed with BT on a timetable to open up the local loop to competition, both of which will make a real difference to broadband access throughout the country. Finally, the Government are investing in ICT centres throughout disadvantaged parts of the country, including many rural communities.

Business of the House

Sir George Young: Could I ask the Leader of the House to give us the business for next week?

The President of the Council and Leader of the House of Commons (Mrs. Margaret Beckett): The business for next week will be as follows:
MONDAY 31 JANUARY—Second Reading of the Utilities Bill.
TUESDAY 1 FEBRUARY—Conclusion of remaining stages of the Financial Services and Markets Bill.
WEDNESDAY 2 FEBRUARY—Opposition Day [4th Allotted Day]. Until about 7 o'clock, there will be a debate on immigration and asylum followed by a debate entitled "The Two Britains: the run down of Northern Cities and over-building in the South". Both debates will arise on Opposition motions.
THURSDAY 3 FEBRUARY—Motions on the Police Grant Reports (England and Wales).
Motions on Local Government (Finance) Reports.
FRIDAY 4 FEBRUARY—Private Members' Bills.
The provisional business for the following week will be as follows:
MONDAY 7 FEBRUARY—Motions on Social Security Orders.
TUESDAY 8 FEBRUARY—Second Reading of the Armed Forces (Discipline) Bill. [Lords].
WEDNESDAY 9 FEBRUARY—Second Reading of the Postal Services Bill.
THURSDAY 10 FEBRUARY—Second Reading of the Sexual Offences (Amendment) Bill.
FRIDAY 11 FEBRUARY—Private Members' Bills.
The House will also wish to know that on Wednesday 9 February there will be a debate on an unnumbered explanatory memorandum submitted by the Foreign and Commonwealth Office on 30 November 1999, relating to common strategy on Ukraine, in European Standing Committee B. Also on Wednesday 9 February there will be a debate on European Document No: 10948/99, "State Aid to the Coal Industry" in European Standing Committee C. Details of the relevant documents will be given in the Official Report.
[Wednesday 9 February 2000:
European Standing Committee B—Relevant European Union document: Unnumbered explanatory memorandum submitted by the Foreign and Commonwealth Office on 30 November 1999, Common Strategy on Ukraine; Relevant European Scrutiny Committee Report: HC 23-iv, (1999–2000).
European Standing Committee C—Relevant European Union document: 10948/99, State aid to the Coal Industry; Relevant European Scrutiny Committee Report: HC 34-xxx (1998–99).]
I should like to inform the House of business to be taken in Westminster Hall for the next four Thursdays when the House is sitting.
THURSDAY 3 FEBRUARY—Debate on children's social services.
THURSDAY 10 FEBRUARY—Debate on the Fifth Report from the Agriculture Committee Session 1998–1999 on Badgers and Bovine Tuberculosis.
THURSDAY 17 FEBRUARY—Debate on UK engagement in Africa.
THURSDAY 2 MARCH—Debate on the Twentieth Report from the Environment, Transport and Regional Affairs Committee on town and country parks.

Sir George Young: The House is grateful for next week's business and an indication of the likely business for the following week.
Next week is an important week for Northern Ireland, with the de Chastelain report expected. Can we expect a statement from the Secretary of State for Northern Ireland outlining the Government's response? Also, can we expect statements next week from the Home Secretary on his decision on Senator Pinochet, and from the Secretary of State for Culture Media and Sport on his proposals for a new tax on digital television?
When will we have a debate on the Wakeham report on reform of the House of Lords? Can the Leader of the House say when she will set up the promised Joint Committee to take that forward, and whether Ministers will sit on it?
Finally, can we have a debate in Government time on the Government's policy on the euro to clarify the growing confusion in the Cabinet, with those at the back shouting "Forward" and those at the front shouting "Back", and with the Prime Minister saying as little as possible? Is not a debate now essential, so that the House and the country can try to discover what on earth is going on?

Mrs. Beckett: The right hon. Gentleman will appreciate that neither he nor I—nor, indeed, my right hon. Friend the Secretary of State for Northern Ireland—can yet know what is likely to be the content of the de Chastelain report. At present, I cannot say what the position will be, but I undertake to pass on to my right hon. Friend the right hon. Gentleman's request for such a statement, should that seem to be the right thing to do.
The right hon. Gentleman asked for a statement on Senator Pinochet. He will know that my right hon. Friend the Home Secretary has indicated consistently that, when he makes a decision, he has every intention of coming to the House to make a statement. However, the right hon. Gentleman and the House may not be aware that, apparently, there has been a challenge from the Belgian Government to the way in which the issue has been handled. It is my understanding that this may make the matter sub judice again.
As I said, my right hon. Friend the Home Secretary has always made it plain that he has every intention and desire to come to the House to give a full explanation of any decision that he is able to make, but he will now have to steer his way through that particular thicket. That is the best that I can do to inform the right hon. Gentleman of the position.
On digital television, my right hon. Friend the Secretary of State for Culture, Media and Sport is considering a report to him and not a proposal from the Government for anything, let alone a new tax. I am confident that my right hon. Friend will seek to make a statement to the House when he has something to announce.
I cannot tell the right hon. Gentleman when I anticipate that it might be possible to debate the Wakeham report, or when it is likely that the proposal for a Joint Committee will be taken forward. As for whether Ministers will serve on it, I freely confess that I had not given the matter a moment's thought. I am grateful to the right hon. Gentleman for notice of the fact that the idea had crossed his mind—it had not crossed my mind, I must admit.
Of course, Madam Speaker, it is for you to decide whether something is tedious repetition as opposed to just repetition. However, I say yet again to the right hon. Gentleman that there is no confusion on the Government's policy on the euro. It remains what it has always been. I know that it is a matter of great unhappiness for the news media and for the Conservative party that that is so, but there we are.

Dr. Brian Iddon: The Government have excellent policies to deal with social exclusion. In London, Louise Casey is taking people—including many with drug and alcohol problems—off the streets, but elsewhere in the country people are locked up for doing a similar job. Yet again, in London people are developing dual diagnoses for dealing with psychiatric cases who use drugs, but elsewhere people are locked up on psychiatric wards for using drugs. Will my right hon. Friend arrange, in the near future, for a debate on the way in which social exclusion policies are enacted on the ground?

Mrs. Beckett: I understand the concern that lies behind the issues that my hon. Friend has raised. He will know, I hope, that apart from what is being done in London, similar action is being taken across the country. For example, 4,000 new beds nationwide are being brought into use for people sleeping rough, compared with the 850 which are specifically in London. The Government are endeavouring to ensure that there is a consistent approach to both the prevention of the problems arising and to the matters that we hope will help to resolve them. I cannot give my hon. Friend the undertaking that we shall have an early debate. However, he will be aware that, these days, there are more opportunities for such debates and he may seek to pursue them.

Mr. Paul Tyler: I endorse the request for as early a statement on the decommissioning of arms as is physically possible from the Secretary of State for Northern Ireland. As soon as the de Chastelain report is available to him, will he make a statement to the House?
In the light of the experience of the past two days, will the Leader of the House re-examine the case for a Business Committee to see whether—on some occasions at least—we can reach agreement with Back Benchers as well as with the usual channels on the best way to deal with business? I have seen the letter from the Leader of the Opposition to the Prime Minister, so will the right hon. Lady reconsider the possibility of opening new channels of communication with other parts of the Conservative party? Clearly, the Leader of the Opposition does not speak on behalf of his Back Benchers.
In that context, may I suggest that the right hon. Member for Bromley and Chislehurst (Mr. Forth) is nothing like as bad as he is painted? It might be sensible

for the right hon. Lady to discuss with him the management of business in the House. His bark is nothing like as bad as his bite—he is a man of great charm. As a new business manager for the Conservative party, he might be able to deliver what he promises.

Mrs. Beckett: First, I have taken on board the hon. Gentleman's point about Northern Ireland. As I said to the right hon. Member for North-West Hampshire (Sir G. Young), I shall take the matter up with my right hon. Friend the Secretary of State for Northern Ireland. I am sure that my right hon. Friend will be more than willing to make a statement, but my only caveat is that we must preserve some room for manoeuvre for him if, for some reason, he feels that that is not quite the right way to proceed. I shall certainly draw the concerns to his attention.
With regard to the proposal to have a Business Committee, my immediate reaction is that it is interesting. However, the problem is not that we cannot reach agreement—we do and, indeed, arrangements are made, as the shadow Home Secretary made plain only on Monday. The problem is that the agreement then falls into disrepair and is not heeded. When the hon. Gentleman made his suggestion, the thought crossed my mind that whether or not the committee served any useful purpose would depend on who sat on it.
I entirely take the hon. Gentleman's point, but I do not think that I have ever abused the right hon. Member for Bromley and Chislehurst (Mr. Forth)—although I have, from time to time, expressed happiness at not having been present for all his contributions. I do not doubt that he has some good points: most human beings do. While I understand the concern for the good order of the House that leads the hon. Member for North Cornwall (Mr. Tyler) to make his suggestion, I do not think that it is for the House to sort out the problems of the Conservative party. It is time that it sorted them out itself.

Mr. David Chaytor: Does my right hon. Friend agree that the negotiations on the biosafety protocol, held in Montreal last week and this week, are of enormous significance to future policy on genetically modified foods? Given the huge and continuing public interest in food safety and the impact of GM foods, does she further agree that it is time we had a statement on GM foods, especially following the discussions in Montreal?
Given that multilateral, international and environmental agreements are of increasing importance to domestic policy, does my right hon. Friend agree that, as a matter of routine, a statement should be made on the outcome of all such conferences?

Mrs. Beckett: Of course I have great sympathy with my hon. Friend's concern on those matters; he has expressed it on many occasions. I am aware of the importance of the discussions in Montreal, but I have not had an opportunity to see a report of any sort or to have a conversation with my right hon. Friend the Minister for the Environment, who led for the Government in those discussions. Therefore, I do not know whether sufficient conclusions were reached to enable my right hon. Friend to make a report to the House on anything other than that discussions are continuing.
I share my hon. Friend's view that it is a good thing for the Government to keep the House informed of what is happening when there are practical outcomes to report.


However, I fear that I cannot undertake always to have a statement on all such meetings, because, as I am sure he appreciates, there are dozens, if not hundreds, of them.

Mr. Peter Brooke: Given the Leader of the House's confidence in the enthusiasm of the Secretary of State for Culture, Media and Sport to make a statement on his response to the Davies report, can the right hon. Lady remind the House of when her right hon. Friend received the report?

Mrs. Beckett: I cannot recall—there are so many such reports—but I believe that it was in the summer. I am aware that the report made some interesting and, in some ways, controversial suggestions. I am sure that the right hon. Gentleman would want my right hon. Friend to give it proper consideration and to come to the House when he has firm decisions to announce.

Mr. Dale Campbell-Savours: Can we have a debate on the need to review the arrangements for the chairmanship of debates in Westminster Hall, especially in the light of what happened in the Chamber last night, when two Deputy Speakers came into conflict and, in my view, undermined internationally the credibility of the United Kingdom's arrangements?

Mrs. Beckett: My hon. Friend raised that matter last night. I accept that unfortunately it sometimes happens in the House relatively late in the day—especially when that day has extended over two chronological days—that hon. Members do or say things which, with the benefit of more mature thought, they would not have done or said. I accept my hon. Friend's point that the hon. Member for Macclesfield (Mr. Winterton) has certain responsibilities, but I know that the hon. Gentleman is always very conscious of those responsibilities. As I said, these things happen from time to time; I hope that we can all move on.

Mr. Graham Brady: I am sure that the Leader of the House is familiar with recommendations 19 and 20 of the sixth report of the Committee on Standards in Public Life, especially with the strong recommendation, No. 20, which states:
Pending the enactment of the Civil Service Act, the Government should put before both Houses of Parliament for debate a limit on the total number of special advisers that can be appointed within Government.
I do not think that the right hon. Lady said that such a debate would be held in the next fortnight. Does she have plans to hold such a debate in the next fortnight? If not, when will it be held?

Mrs. Beckett: I certainly have no plans for such a debate in the next fortnight. I am aware of the recommendation and I am also aware—contrary to what Conservative Members seek to imply—that nothing was said to suggest that there is anything wrong with the number of special advisers that the Government have at present. As I have reminded the hon. Gentleman before, the amount of money received by the Conservative party has been trebled, so it is now able to employ more advisers.
I cannot tell the hon. Gentleman when a debate will be held. When I am ready to tell him, I shall do so from the Dispatch Box.

Mr. Andrew Dismore: Today is the anniversary of the liberation of Auschwitz-Birkenau by

allied forces in 1945. Yesterday, my right hon. Friend the Prime Minister announced that from next year this date will be commemorated as national holocaust memorial day. Can my right hon. Friend find time for a debate so that we can discuss the objectives of the day, which are to commemorate all the victims of the holocaust, to educate today's generations on the lessons of that defining moment in world history and the relevance of it to today's world, and to reaffirm our national commitment to confront racism, anti-semitism and genocide whenever and wherever those issues raise their ugly heads?

Mrs. Beckett: I am aware of the Government's proposal for a holocaust memorial day. I am aware also of how much work my hon. Friend has done in this regard and of his strong support and advocacy for such a commemoration. I share his view, as do the Government, that it is important that we learn lessons from some of the most dreadful events that have happened in human history, so that we may do our utmost to strive to avoid any circumstances in which they are repeated. I cannot undertake now to find time for a debate, but I share his view that this is an important issue.

Dr. Julian Lewis: Given the importance of decommissioning in the Opposition's support for the Good Friday agreement, may I add my support for the requests for a statement on the de Chastelain report? In asking the Secretary of State for such a statement, will the right hon. Lady convey to him the concerns of those of us who are worried that if all arms are supposed to be decommissioned by the end of May, there seems to be no progress in decommissioning any of them by the end of January?

Mrs. Beckett: As the hon. Gentleman rightly identified, that is a matter for the decommissioning commission and for General de Chastelain. We are awaiting his report. We have precisely charged him with the responsibility of assessing the circumstances that he finds and reporting on them to the Government. I know that the hon. Gentleman will have taken on board the fact that I am not in any sense resisting the notion of a statement on this matter. I am simply seeking to reserve some freedom of manoeuvre for my right hon. Friend to do what he believes is in the interests of the peace process, which is supported on both sides of the House.

Mr. Gordon Prentice: On Monday, we debated at some length a private Bill, the City of London (Ward Elections) Bill, which gives votes to owners of property—more buildings, more votes. I discovered during the debate that private legislation does not need to be certified as being in accordance with the Human Rights Act 1998, unlike public legislation. The Bill, to which many of my right hon. and hon. Friends deeply object, will return to the House at some stage. Is my right hon. Friend able to reassure me that there is a possibility of a one-line Bill coming before the House that will put private legislation on the same footing as public legislation?

Mrs. Beckett: Of course I take my hon. Friend's point. However, the fact that a Bill is a one-line Bill is no guarantee of anything. I will share with my hon. Friend and the House the information that, having read Madam Speaker's selection of amendments, which were debated


over the previous two days, and seeing that there was a reference to clause 4, I hunted for the clause for some considerable time before I could find it. It is one short and unimportant line in the Bill, which nevertheless was debated for some hours by Opposition Members yesterday.
I return to my hon. Friend's point of substance. I am aware that there are those who oppose the City of London (Ward Elections) Bill. It is for right hon. and hon. Members to express their points of view. However, my hon. Friend will know that agreement has been reached among—I think I am correct in saying—Labour local authorities in that part of London that the balance of arrangements in the Bill is something that they would support.

Rev. Martin Smyth: I understand the right hon. Lady's position on giving the Secretary of State for Northern Ireland freedom of movement, but perhaps she does not realise that speculation is rife in the media in Northern Ireland. Will there be an early statement in the House so that we can understand what will happen after General de Chastelain makes his report? I hope that we shall not have to wait as long as we have awaited a statement on Indonesia, where people continue to perish and where trade routes in the area could be put in jeopardy.

Mrs. Beckett: The hon. Gentleman is correct to say that he has been pressing for a statement on Indonesia. I am sorry that it has not been possible to find time for it.
For good or ill, there will always be speculation in the media. I take the hon. Gentleman's point that it lends weight to his request for a statement on decommissioning.

Helen Jones: Can my right hon. Friend find time for a debate on the role and powers of the Charity Commission? My request arises from a problem with a charity called Integrate Services in my constituency. The Charity Commission has been slow to investigate the problem, or, has lacked the necessary powers or has been reluctant to use existing powers. The only people who have suffered are those with learning difficulties, for whom the charity cares, and the whistleblowers who made allegations about the running of the charity.
Other hon. Members have experienced similar problems. On some occasions, the Charity Commission has been as much use as a chocolate fireguard, as we say in my neck of the woods. Is it not time we reviewed charity law so that vulnerable people can be properly protected?

Mrs. Beckett: I am aware of the anxiety that my hon. Friend expresses and the concern that she shows for vulnerable people. I understand her anxiety about the difficulties that she outlined. However, I fear that I cannot undertake to find time for an early debate. I suspect that Governments of all political shades have contemplated a fresh look at charities law, winced and turned away for the time being because of its enormous complexity. I suggest that my hon. Friend seeks other opportunities

for a debate. The Charity Commission is based in Liverpool. My hon. Friend may find that a visit and a discussion helps.

Mr. Patrick McLoughlin: Have the Government abandoned the practice of holding an annual road safety debate? Is the right hon. Lady aware of the growing concern about the way in which police forces investigate motor cycle accidents that involve fatalities? I am involved with two cases: one in Leicestershire and one in Derbyshire. There is grave concern about the way in which the police have investigated those accidents. Is not it time that we reinstated the annual road safety debate in the Chamber?

Mrs. Beckett: I freely confess that the notion that such a debate is held annually rather than from time to time had passed me by. I shall draw the hon. Gentleman's remarks to the attention of my right hon. and hon. Friends. However, I suspect that, as a major Transport Bill is to be considered this Session, the hon. Gentleman will have ample opportunity to air those matters.

Mr. Mike Gapes: Has my right hon. Friend had an opportunity to study the debates in Westminster Hall recently, especially the debate that was introduced on 11 January by my excellent right hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) on poverty in London? Can we have an early debate in this Chamber on the future of London and its government to enable my right hon. Friend and others to point out the need for team work and co-operation between all those elected in London to make this great city effective and to tackle the problems of poverty, crime and poor health in our capital city?

Mrs. Beckett: My hon. Friend is entirely right and I am aware of the debate that was held in Westminster Hall. Indeed, I have a feeling that I have heard my right hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson)—whose concern on such matters is well known and whose very real feel for them has been evident throughout his career—speak about them in the Chamber, possibly in the Queen's Speech debate. Although I share my hon. Friend's admiration for our right hon. Friend's record, I fear that I cannot undertake to find time in the near future for such a debate. However, I am confident that, whenever the opportunity arises, he will continue to express those concerns as effectively as he always has done.

Mr. Stephen O'Brien: Will there be time for an urgent statement on the chaotic state of asylum in Britain so that the debate announced for next week will be better informed and we will know the background to the arguments for no more amnesties, more international co-operation and increased use of detention to deter bogus applications?

Mrs. Beckett: I do not see the need for a special debate or a statement at the moment because we are to have a debate. The hon. Gentleman says that we need to know the background, but the House is already familiar with it. The Government continued to operate the Asylum and Immigration Act 1996, which was introduced by the previous Government. It was not working and we


tightened its provisions. The only two proposals made by the Conservative party would weaken the controls that the Government have announced so far. In consequence, we know quite as much as we need to know about the background to the debate, on which the Conservative party's record is totally inconsistent and totally incompetent.

Mr. Tony McWalter: Has my right hon. Friend seen the extraordinary and possibly even alarming recent statements that human life expectancy might stretch to 140 years? Will my elderly constituents have to wait that long before we debate the Sutherland report on care for the elderly, which was published in March 1999? Does she agree that we should have an early and urgent debate?

Mrs. Beckett: I was not aware of that forecast, which is slightly daunting, but I fear that my hon. Friend is uncharacteristically not quite accurate, as we have debated the issues that underlie and surround long-term care. I can assure him that the Government continue to pursue those issues and over the ensuing year—various proposals are already before the House—there may be opportunities to air them. I fear, however, that I cannot give him further news about the special debate he seeks.

Mr. Owen Paterson: With the polls today showing plummeting public confidence in the Government's ability to run the health service and the country's transport system, the Prime Minister dragged the Chancellor off to Southwark last week, and the Deputy Prime Minister off to Southall last night, in an increasingly desperate and apparently unsuccessful campaign to block the mayoral ambitions of the hon. Member for Brent, East (Mr. Livingstone). Was that an appropriate use of the right hon. Gentleman's time? Could we please have a statement next week confirming that he will stop gallivanting around London after the mayoral appointment has been made, and that Ministers will concentrate on their portfolios, as they are paid to do by the taxpayer?

Mrs. Beckett: Clearly, the hon. Gentleman is unaware that it is almost my right hon. Friend's habit—there is certainly a consistent pattern—to continue to maintain a dialogue with members of his party. He holds many meetings up and down the country, and has always done so—and very successful they are. In view of the events of the past couple of days, I suggest that maintaining a dialogue with one's party is perhaps something that the Leader of the Opposition should consider.

Mr. John Cryer: Is my right hon. Friend aware of early-day motion 277, which stands in the name of my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore), on staff shortages in the London fire brigade?
[That this House is concerned that the London Fire Brigade is currently 132 persons under strength; believes that these positions should be filled by recruitment rather than by members of the Fire Brigade Union working excessive overtime; is very concerned indeed that the management of the London Fire Brigade have suspended 11 FBU members at Homerton Fire Station for supporting their union's ban on overtime; believes that the action of

management was both provocative and unnecessary; and calls on the Chief Fire Officer for London to reinstate the 11 members and get on with the business of recruiting the shortfall in staff so as to protect the public.]
During that suspension, a fire call came to Homerton fire station and those 11 firefighters were physically prevented from attending by senior officers. That bullying and intimidation comes when the London fire brigade is dangerously under strength and has undergone cuts year on year. Could we have an urgent debate on fire safety and the London fire brigade?

Mrs. Beckett: I know of my hon. Friend's longstanding concern about firefighting and safety. I was not aware of the events to which he referred. These issues are managed locally by the fire authority. I understand that there is an intention to have an intake of firefighter recruits at the end of this month. The whole House will share my hon Friend's concern for fire safety and will hope that this will continue to be addressed.

Mr. Nicholas Winterton: I did not intend to rise during business questions today, but I feel obliged to do so because of the intervention of the hon. Member for Workington (Mr. Campbell-Savours) who referred to an exchange last night between myself and a Deputy Speaker when I sought to express my concern about the Government's misrepresentation of a letter sent by my right hon. Friend the Leader of the Opposition to the Prime Minister. Is it not time that the House was made aware of the difference in the role, responsibilities and status of Deputy Speakers who serve directly under you and of the newly appointed additional Deputy Speakers for sittings in Westminster Hall? Perhaps the Leader of the House could make a statement at an early date to ensure that all hon. Members are aware of the difference so that such questions would be unnecessary.

Mrs. Beckett: The hon. Gentleman knows that these matters were aired when we decided how Westminster Hall would be brought into being and the nature of the arrangements for chairing its sittings. I accept that not all hon. Members have studied the distinctions closely. He knows that I take the view, as he usually does, that it is important that we strive at all times to lower the temperature here and to do our business expeditiously and with some fairness. I was sorry and surprised to learn that he believed that the Government had misrepresented the Leader of the Opposition's letter since I had an enjoyable few hours yesterday showing it to journalists and Members who had no knowledge of its contents. Every one of them interpreted it entirely spontaneously in precisely the same way as the Government did. I have re-read it since his remarks because I could not understand why he thought that we had misrepresented the Leader of the Opposition—I am not saying that I am unwilling to do so, but I was not aware of having done so on this occasion. If the hon. Gentleman is right, I struggle to see how we have misrepresented the Leader of the Opposition. Perhaps it would help if the right hon. Gentleman sent another letter.

Dr. Howard Stoate: Is my right hon. Friend aware that there was great concern in my constituency about the planning legislation surrounding the siting of mobile phone masts and that 160 hon. Members from all


parties have signed an early-day motion on the matter? Would it be possible to find time for a debate on the health, planning and environmental consequences of mobile telephony, particularly as the technology has far outstripped the legislation, which is looking more and more out of date as time goes on?

Mrs. Beckett: I am aware of the great interest and concern about these matters. Indeed, having had such an issue raised in my constituency I, probably like my hon. Friend, have ploughed through the literature and am well aware how far from clear the position is. The matter is being kept under review, but I shall certainly draw his remarks to the attention of my right hon. Friend the Secretary of State for Trade and Industry.

Mr. John Bercow: Can we please have a full debate as soon as possible in Government time on cancer services? Does the Leader of the House agree that it would be made particularly timely by tonight's palace of varieties' concert in which no fewer than 21 parliamentarians from across the political spectrum are participating, including the right hon. Lady, my hon. Friend the Member for South Staffordshire (Sir P. Cormack) and me? Does she accept that members of the public would think it appropriate that, whatever our views about the solutions to the problem, the House should have a full debate as early as possible about a disease from which at some stage in life no less than one person in three has the misfortune to suffer?

Mrs. Beckett: The hon. Gentleman is right. The whole House shares the concern about cancer services and is anxious that they are provided to the highest possible standards. I am not sure that I am entirely grateful to him for drawing attention to the fact that such a large number of us are making fools of ourselves in a good cause. My participation is not entirely voluntary as the invitation was accepted by my husband without consulting me, but there you go.

Mr. David Winnick: Is my right hon. Friend aware that, although I profoundly disagree with what the hon. Member for Macclesfield (Mr. Winterton) said yesterday—there was no justification for his remarks—I also disagree with my hon. Friend the Member for Workington (Mr. Campbell-Savours)? The trouble with the hon. Member for Macclesfield is that, unlike me, he is an excitable person.
Remembering the exercise that was organised by Opposition Back Benchers yesterday, when, clearly, Opposition Front Benchers were not in control of matters, will she bear it in mind that, as we near what could be a crisis point over Northern Ireland, many Members on the Opposition Back Benches—not the Front Bench—together with some Unionists, are determined to do what they can to undermine the Good Friday agreement? They are not just arguing about the lack of decommissioning. They were against the Good Friday agreement from the beginning.

Mrs. Beckett: My hon. Friend is correct—I do not think that any hon. Member would dispute it—that some of those who took part in the activities of the past couple

of days oppose many of the things that have taken place in Northern Ireland, as they have made plain in the House. I do not think that anyone would argue that that is a misrepresentation. However, my hon. Friend will be aware, as we all are, that the official Opposition have continued to say that they support the Good Friday agreement.

Mr. Winnick: Front Bench.

Mrs. Beckett: Indeed. That is what I mean when I say the official Opposition. Most Members in every party support the Good Friday agreement and wish the peace process to succeed. We all understand that anxieties and fears are raised. That is inevitable when there are such difficult issues to be resolved in a dispute that has gone on for so long, but we must all hope that those matters are resolved—that, in future, in the House, as elsewhere, they are no longer matters of dispute.

Mr. Douglas Hogg: The right hon. Lady referred to the debate on Thursday on the police grant. She will know that, in the Home Office, there is a working party report on sparsity. The Home Secretary sent me a copy. Will she ensure that it is generally available by putting it in the Library before the debate? She says that she will talk to the Secretary of State for Northern Ireland about a statement. Will she urge on him the desirability of telling the House what the genesis of the Disqualifications Bill was because, most of us believe that we have not yet been told the facts?

Mrs. Beckett: The right hon. and learned Gentleman makes an important point about the working party report. I do not know whether it is possible for it to be placed in the Library. I undertake to draw his request to the attention my right hon. Friend the Home Secretary, who, as he knows, is always keen to keep the House informed. I am sure that the Home Secretary will carefully consider that proposal.
I am sorry to hear the right hon. and learned Gentleman returning yet again to the issues that have been discussed over the past couple of days. I am not entirely sure whether he was here for the Second Reading debate on Monday.

Mr. Hogg: I spoke in it.

Mrs. Beckett: In that case, I beg his pardon, but if he spoke in it, he will have heard the right hon. Member for Maidstone and The Weald (Miss Widdecombe), the shadow Home Secretary, say on behalf of the official Opposition that they did not object to the Bill and that the rest of the discussion would be given a fair wind. It is unfortunate that that did not happen. However, it is not for us to grieve when the Conservative party insists on shooting itself in the foot.

Mr. David Drew: Will my right hon. Friend consider a debate in the House on rural policy? I gather that the Prime Minister will make some statements in the next week, which would be useful. [Interruption.] I should welcome such a debate, if for no other reason than to clear up the misrepresentations that characterise the comments of Conservative Members and inform the debate in the run-up to the White Paper on rural policy.

Mrs. Beckett: I cannot undertake to my hon. Friend to find time for a special debate in the near future, but he is


right that a White Paper is in train and to seek to highlight the extra investment in, for example, rural buses that has been made under the Government. I am sure that there will be opportunities for such a debate.
I hope that I will not offend you, Madam Speaker, if I briefly take the opportunity to tell Opposition Members—who, not for the first time, are heckling hon. Members such as my hon. Friend the Member for Stroud (Mr. Drew) who make serious and sensible points by making remarks about a Tory gain—that the last person I heard say that before the general election was the then Conservative Member for Wirral, West. He said it to my hon. Friend the Member for Wirral, South (Mr. Chapman). The one who is still here is my hon. Friend.

Mr. Peter Viggers: Do the Government have any intention to bring before the House legislation to amend the Oath sworn by hon. Members?

Mrs. Beckett: No.

Mr. Geraint Davies: A constituent of mine claims that his son was abused in a McDonalds restaurant, by a McDonalds employee, in the McDonalds play-zone for children. When will there be an opportunity to debate the screening of prospective employees of organisations that look after our children, when our children may be at risk, so that such incidents do not occur in future?

Mrs. Beckett: I am sorry to hear about the experience of my hon. Friend's constituent. I can certainly tell him that, in the very near future, there will be a debate in Westminster Hall in which he may find an opportunity to raise such issues.

Mr. Patrick Nicholls: If the right hon. Lady is minded to reconsider the request made by the hon. Member for North Cornwall (Mr. Tyler), will she bear it in mind that, throughout the recent debates on the Disqualifications Bill, Liberal Democrat Members both voted and spoke, and that one of the speakers was the hon. Gentleman himself?
Will the right hon. Lady therefore reject that idea, but consider instead a debate on the proposals by the Lord Chancellor to reduce the number of magistrates courts in Devon by more than half? Would not such a debate give us the opportunity to realise that what the Lord Chancellor should be doing is providing a proper criminal justice

system as expeditiously and cheaply as possible—rather than simply working out the tiny sum that he is prepared to throw at the system and producing whatever criminal justice system results? That is not in the tradition of this country, and it is not how criminal justice should be administered.

Mrs. Beckett: Leaving aside the issues yet again of what was discussed in the past couple of days, the hon. Gentleman makes an important point on rural courts. He may be aware that the matter was debated last week, in Westminster Hall. I can only say that the Lord Chancellor fully shares the goals and principles that the hon. Gentleman expressed of having an efficient and effective justice system and believes that his proposals will assist in achieving them.

Mr. Tim Loughton: The Financial Services and Markets Bill is to be allocated two days on Report. Is the right hon. Lady aware that, in those two days, we shall have to consider no fewer than 464 amendments, 43 new clauses and two new schedules, the vast majority of which were tabled by the Government? Although I realise that parliamentary scrutiny is unfashionable with the Government, will she guarantee that if two days prove to be insufficient to debate a highly technical and detailed Bill which has been in Committee since July, she will make extra time available, rather than using the guillotine and thereby denying the House the opportunity properly to scrutinise an entirely new raft of clauses?

Mrs. Beckett: No, I shall give the hon. Gentleman no such undertaking. He is right that the Bill has been the subject of considerable debate and discussion. However, he should know that the Bill's provisions and passage on to the statute book are much sought by those whose interests are affected by it. They are anxious for it to be dealt with as expeditiously as is reasonably possible.
The hon. Gentleman should also know that there has been extensive discussion about how much time should be needed to deal with those matters. The proposals that I put before the House today were made by agreement. He talks about the number of amendments, but he did not draw to the House's attention the fact that, although two thirds of the amendments are Government amendments, many of them deal with matters that arose in Committee, where the Government made a commitment to table them on Report. He also did not mention the fact that one third of the amendments were tabled by the Opposition.

Points of Order

Mr. Paul Tyler: On a point of order, Madam Speaker. I apologise for the fact that I was unable to give you advance notice of this point of order, but you will appreciate that Hansard is extremely full after the debates of the past two days.
I draw your attention to column 557 of the edition for Tuesday 25 January, in which there appears to be a serious error in the report of the exchanges between the hon. Member for Macclesfield (Mr. Winterton) and the Deputy Speaker. No withdrawal of the hon. Gentleman's allegation that Ministers were misleading the House is recorded.
Clearly, there must have been such a withdrawal as, however senior the hon. Gentleman involved, he would have been drawn to the attention of the Deputy Speaker, who presumably would have named him. Can you assure me, Madam Speaker, that the Hansard record will be re-examined and that you will receive a report from the Deputy Speaker?

Madam Speaker: I have looked at Hansard already, and have received a report from the Deputy Speaker. I thought that that exchange last night was extremely disappointing, but the Deputy Speaker accepted what the hon. Member for Macclesfield (Mr. Winterton) said. The matter must rest there.

Rev. Martin Smyth: I appreciate that hon. Members must use accurate terms when they speak in this House. Four times during business questions, I heard reference made to a Good Friday agreement. For the purposes of accuracy, I understand that that agreement should be referred to as the Belfast agreement. I for one consider the Good Friday agreement to be the occasion when Pilate and Herod joined together to crucify the carpenter of Nazareth, whom I and others recognise as the Lord Jesus Christ.

Madam Speaker: I am sure that the House has heard the hon. Gentleman, who is correct to say that the proper way to refer to the agreement in question is as the Belfast agreement. Sometimes we give it perhaps a rather more colourful description.

BILL PRESENTED

POSTAL SERVICES

Mr. Secretary Byers, supported by Mr. Secretary Prescott, Mr. Chancellor of the Exchequer, Mr. Secretary Milburn, Mr. Secretary Darling, Mr. Secretary Reid, Mr. Secretary Murphy, Mr. Secretary Mandelson and Mr. Alan Johnson, presented a Bill to establish the Postal Services Commission and the Consumer Council for Postal Services; to provide for the licensing of certain postal services and for a universal postal service; to provide for the vesting of the property, rights and liabilities of the Post Office in a company nominated by the Secretary of State and for the subsequent dissolution of the Post Office; to make further provision in relation to postal services; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. Explanatory notes to be printed [Bill 54].

Financial Services and Markets Bill

Motion made, and Question proposed,
That the Financial Services and Markets Bill, as amended, be considered in the following order, namely, Amendments to Schedule 1 relating to the separation of the roles of chairman and chief executive of the Financial Services Authority; Amendments to paragraph 7 of that Schedule requiring the complaints scheme to make provision for complaints to be investigated quickly; Amendments to paragraph 8 of that Schedule; Amendments to paragraph 19 of that Schedule; New Clauses relating to the legal assistance scheme; New Clauses relating to reports by the Director General of Fair Trading; New Clauses relating to restrictions on powers of Treasury; New Clauses relating to conduct by the Authority of reviews of rules made under Part IX; New Clauses relating to judicial review; Amendments to Clause 52; Amendments to Clause 10; remaining New Clauses; remaining amendments to Clauses; New Schedules; remaining amendments to Schedules.—[Miss Melanie Johnson.]

Mr. David Heathcoat-Amory (Wells): I want to make a few remarks about the motion, which seeks to order the Report stage debate that we are about to have into a form that is more manageable for the House. I always approve of motions aimed at facilitating debate.
However, this motion does not rectify the basic problem, which is that we are about to embark on discussion of what can only be described as a new Bill. There are about 500 amendments and new clauses, covering about 100 pages. I do not know whether that is unprecedented, but this Bill has been a long time in preparation. The problem is that the importance of the Bill lies in its detail. In our proceedings on the Bill so far, we have discovered that Government assurances are not always reflected in the wording that follows, so we shall want to look carefully at the amendments and new clauses.
The Bill has had a very long gestation period. Its subject was announced for legislation soon after the general election, and the Government introduced a draft Bill for consultation in July 1998. That was considered by a Joint Committee of both Houses under the chairmanship of Lord Burns, which produced reports in April and May last year. After that, the Bill was modified extensively in a number of important respects. For example, as originally drafted, it was incompatible with the European convention on human rights. We believe that it is still vulnerable to challenge, but that is a matter for later debate.
After those reports, the Bill was given a Second Reading, and it went into Standing Committee last July. We sat pretty well continuously, when the House was sitting, until December. There was a carry-over provision so that the Bill did not have to start all over again when the House reconvened after the summer recess. Despite that long process, however, which has enabled draftsmen and the Treasury to examine and re-examine the Bill, we are now faced with some 500 new clauses and amendments.
We do not believe that that is a good way to legislate, nor that it is really the purpose of a Report stage—certainly as I have always understood that term. To give just one example, we shall shortly consider an entire new competition regime, which will affect the relationship between the Financial Services Authority, the Director-General of Fair Trading and the Treasury. This was announced as a subject for legislation when we were in


Standing Committee, but the details were not given, and the details are very important. The clauses giving effect to the new competition regime were only recently drafted. Therefore, we have a problem, with which we shall seek to deal.
Another feature of the Bill is that it relies heavily on secondary legislation, again perhaps to an unprecedented extent. In many respects, it is still only a framework Bill, large areas of which will be enacted subsequently by regulations issued by the Treasury. Even now, those are largely unseen. The consultation documents—over 30 of them—have all gone out, but we have not had reports back on more than a few.
I remind the House that regulations, particularly those dealt with under negative resolution procedure, will be almost entirely unscrutinised by the House. The great majority of statutory instruments introduced to give effect to this secondary legislation will be dealt with under the negative resolution procedure, whereby the matters are almost certainly not debated at all, and whether they are debated is solely at the Government's discretion. Even if the statutory instrument or order is objected to by the Opposition, or by an interested hon. Member, the Government can refuse a debate of any sort.
Although statutory instruments that have to be introduced by affirmative resolution are debated in Committee, that debate is only on a formal and unamendable motion, which is then simply reported to the House and put forthwith. The Bill is therefore the last chance that the House has to build in the necessary checks and balances and to ensure that the powers are properly circumscribed and the details are right. It is therefore difficult that so many amendments have been produced at short notice on Report.
The order of consideration before us tries to make sense of that large volume of amendments. It brings to the front for debate today many of the issues of principle. We will certainly not oppose it, but I thought that I should explain our misgivings, not about the motion but about how the Report stage is being conducted—a lot of material has been brought forward late, despite the fact that the Government announced their intention to legislate more than two years ago.

The Economic Secretary to the Treasury (Miss Melanie Johnson): This is probably one of the most technically complex Bills with which the House has dealt. Certainly, it concerns an enormously technical subject, which has been considered at length not only in Committee but by many outside organisations, not least the Burns committee.
Naturally, we tabled amendments after noting the views of the Burns committee and the interim report produced by Don Cruickshank in July—too late for the tabling of amendments at the Committee stage—and, not least, in response to what Opposition Members said in Committee. Opposition Members cannot have their cake and eat it. If they raise legitimate concerns, the Government will listen, as they always do, and try to respond positively; but when we respond positively, they complain about the number of amendments that have been tabled.
The Opposition tabled some 500 amendments for the Committee stage, and I believe that the Government have tabled 288 for the Report stage. The Financial Services

Act 1986, although less complex, covered some of the same territory. The then Conservative Government tabled 250 amendments and 14 new clauses for the Report stage of that Bill, which was rather shorter than this one. It is as well to put one's own house in order before criticising others.

Mr. Tim Loughton: Will the Minister give way?

Miss Johnson: No, because I do not want to speak for long.
The Bill contains many matters of substance, all of which were considered in Committee, at least in outline. I hope that we shall spend our time today discussing not how we should consider matters, but the matters themselves—matters that Opposition Members would claim to want to discuss. I shall enjoy that debate on the substance of the issues.

Mr. Howard Flight: I thank the Minister for acknowledging the substantial contribution made in Committee by the Opposition, who wanted to get the Bill right, especially in practical and operational terms. It is clearly not the stuff of red-hot party politics. The objective of all of us is to achieve good law for our largest industry, employer and exporter.
The motion divides the territory between issues of principle, and practical and technical issues. As I trust the debate on the technical issues will show, the Government have addressed many of the matters that we have raised; but I must point out, as we embark on the 10 crucial areas of principle, that not only the industry but the regulators support much of what we have said. We look to the Government to accept our key points, at least in principle. Co-operating to produce good law for the country does not mean that we are willing to agree to arrangements that we and many others feel are not yet right.

Mr. Tim Loughton: I had not intended to prolong proceedings, but the Minister refused to let me intervene earlier. The hon. Lady referred to the Financial Services Act 1986. In 1986, of course, financial services regulation was an entirely new subject, so it is not surprising that an awful lot of corrections needed making on Report. I am prepared to admit, however, that the Government have outdone themselves by tabling 288 amendments for the Report stage of this Bill. Furthermore, the 1986 Act did not have the benefit of a long scrutiny procedure under Lord Burns, whose committee took many professional witnesses and made many detailed recommendations, giving the Government a long period of notice in which to act.
My complaint is that we are faced today with just two days to consider what my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) referred to as effectively a whole new Bill. The Government have tabled 36 new clauses, two new schedules and 288 amendments, most of


which we have had less than 72 hours to consider. We did not have the time to discuss many of these matters in Committee.

Miss Melanie Johnson: Will the hon. Gentleman give way?

Mr. Loughton: I will in a minute. If the hon. Lady had been more generous in allowing me to intervene earlier, I would not have had to speak now.
We have had less than 72 hours in which to examine details that were not available to us in Committee. For example, I asked a series of detailed questions in Committee about the legal aid scheme, and was simply told that the Government were considering it. Detailed new clauses and amendments have now been tabled, and as we did not have the benefit of examining them in Committee, we are coming to this technical subject pretty fresh.
Yesterday was another good example. One criticism of the Bill is that it does not limit the Government's powers in deciding what and who should be regulated. That is the sort of definition and capping detail that we spent many months in Committee trying to tease out from the Government. Only yesterday, the Minister announced that mortgages would now be regulated under the aegis of the Financial Services Authority. As my right hon. Friend pointed out, no extra legislation will be required to bring an enormous new raft of the financial services industry into the remit of the FSA, with all the technicalities about charges access terms standards and so on.
Throughout the entire Committee proceedings, we were given very little notice for scrutiny. There was so little meat to get to grips with. We have not seen the results of consultation exercises, which is the source of our complaint today. I hope that the Government will pay some attention to the fact that we have had very little notice of much new legislation that is being shoved into this already enormous Bill. If we need more time to debate this than the two days allocated, I hope that they will be sympathetic and not simply steamroller the Financial Services and Markets Bill mark II through its remaining stages at this late stage.

Sir Nicholas Lyell: I agree with what my right hon. and hon. Friends have said. I welcome the Economic Secretary's comment that the Government always listen carefully to what is said in debate. It is a great pleasure to see the Chief Secretary to the Treasury in his place.
As we consider the ordering of our debates—it is sensible to put the matters of principle up-front—I draw attention to some of the key points with which we are dealing. As the Minister rightly said, the broad objectives are matters of agreement.
The objective of the Bill is to create an updated framework for the financial services industry. However, our debates need to focus on the checks and balances. I should thought have that the Government would agree that there should be checks and balances. If they agree, they should be aware that there are few of them in the measure.
The Bill gives enormous—almost unfettered—power to the FSA and to the Treasury. Many of the provisions are imprecise, because they will have to be dealt with in secondary legislation. A constant criticism has been the lack of accountability to Parliament and to the courts. Under one group of amendments, we shall debate the fact that the new authority will have complete immunity. As hon. Members will be aware, I support a substantial measure of immunity, but there is no compensation for mistakes by the FSA, except on an entirely ex gratia basis.
The Bill has been drafted in such a way that it is plain to lawyers who have looked at it—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the right hon. and learned Gentleman, but, based on his remarks so far, I must point out to him that this is not a Second Reading debate. We are debating a motion that relates only to the order in which items are taken. I cannot permit him to go into matters of substance.

Mr. Andrew Tyrie: On a point of order, Mr. Deputy Speaker. I shall be careful in what I say, because I am sure that you carefully considered the Bill overnight and that you will have noticed that we are faced with—in large part—a new Bill. I think that my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) is trying to flag up those matters that he feels should be included higher in the order for consideration of this, in effect, new—

Mr. Deputy Speaker: Order. The right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) has sufficient experience of the House to know exactly what he wants to say without the help of his hon. Friend the Member for Chichester (Mr. Tyrie). It is not a point of order for the Chair to determine the matters before the House.

Sir Nicholas Lyell: I am most grateful to you, Mr. Deputy Speaker, because you enable me to focus on the importance of the order in which we take these matters.
Ministers will recognise the importance of allowing sufficient time to consider carefully the degree to which the Bill is being made judicial review-proof. Obviously, I shall not expatiate on that matter at this stage.
However, it is helpful to flag up that we need time to focus on the fact that it is unnecessary to draft a Bill so that it minimises the courts' ability to see whether the way in which the legislation is created and put into effect is reasonable. The Government would claim reasonableness for their legislation. However, they must examine the measure, in the time that we have available, to see whether it would lead to reasonableness.
I am glad that time has been found for discussion of the important matter of competition. However, before we debate the amendments on that subject, the Government will want to reflect on the fact that they may have entirely missed the point about competition and competitiveness.
If you study the amendments, Mr. Deputy Speaker—as I am sure you have—you will notice that those relating to the Competition Commission, according to list, deal wholly with matters connected to competition within the United Kingdom. I have been unable to find an amendment that provides for the worldwide competitiveness of our


financial services industry. That matter causes us much concern. I hope that the order of consideration of the amendments will enable the Government to concentrate on those crucial points, which, about 18 months after the publication of the first draft of the Bill, continue to elude them.
Question put and agreed to.
Resolved,
That the Financial Services and Markets Bill, as amended, be considered in the following order, namely, Amendments to Schedule 1 relating to the separation of the roles of chairman and chief executive of the Financial Services Authority; Amendments to paragraph 7 of that Schedule requiring the complaints scheme to make provision for complaints to be investigated quickly; Amendments to paragraph 8 of that Schedule; Amendments to paragraph 19 of that Schedule; New Clauses relating to the legal assistance scheme; New Clauses relating to reports by the Director General of Fair Trading; New Clauses relating to restrictions on powers of Treasury; New Clauses relating to conduct by the Authority of reviews of rules made under Part IX; New Clauses relating to judicial review; Amendments to Clause 52; Amendments to Clause 10; remaining New Clauses; remaining amendments to Clauses; New Schedules; remaining amendments to Schedules.

FINANCIAL SERVICES AND MARKETS BILL [WAYS AND MEANS] (No. 2)

Resolved,
That, for the purposes of any Act resulting from the Financial Services and Markets Bill, it is expedient to authorise—

(a) the imposition of charges to income tax and corporation tax by provisions of that Act relating to the treatment for the purposes of the Income and Corporation Taxes Act 1988 of payments made to any person as a result of any provision made by the Financial Services Authority for the distribution of money repaid to it by the Lord Chancellor in respect of the legal assistance scheme;
(b) the imposition by the Authority on authorised persons of requirements to make payments to it in connection with the legal assistance scheme;
(c) payments into the Consolidated Fund.—[Mr. Timms.]

Orders of the Day — Financial Services and Markets Bill

[1ST ALLOTTED DAY]

As amended in the Standing Committee, considered.

Schedule 1

THE FINANCIAL SERVICES AUTHORITY

Mr. David Heathcoat-Amory (Wells): I beg to move amendment No. 19, in page 196, line 24, at end insert—
(aa) a chief executive; and".

Mr. Deputy Speaker (Sir Alan Haselhurst): With this it will be convenient to discuss the following amendments: No. 20, in page 196, line 41, leave out "Authority" and insert "Treasury". No. 54, in page 197, line 8, at end insert—
(aa) reviewing and approving the Authority's annual budget of income and expenditure,".
No. 21, in page 197, line 10, leave out "and".
No. 22, in page 197, line 13, at end insert—
";and
(d) providing an independent perspective on the overall running of the Authority, scrutinising and monitoring the approach of its executive management, the Authority's performance and its standards of conduct".

Mr. Heathcoat-Amory: This group concerns the powers of the chief executive and chairman and whether they should be combined or separated. The amendments also make provision for changes in connection with the non-executive directors.
The Bill gives statutory backing to the Financial Services Authority, which relies in most cases on powers derived from the Financial Services Act 1986. The FSA can rely in some respects on more recent legislation such as the Bank of England Act 1998, which provided for banking supervision to be given to the FSA.
In many respects, the Bill gives statutory backing to an authority and concentrates executive authority in a way not seen before in regulatory legislation. The FSA will not only be a strong executive body but will make rules that will have the force of law. Those rules will be consulted on and I am sure that the FSA will not bring them forward without proper care and attention—but Parliament will be delegating that rule-making and, in effect, law-making process to another body. We ought to be careful of the conditions under which we do that, and need to put checks on any abuses that could occur.
The FSA will also enforce its rules. It will investigate breaches and discipline those found to be breaking them—if necessary with large fines. The authority's power to fine will be unlimited. The FSA is not part of government, so not directly accountable to the House. It is a private company limited by guarantee but has statutory functions conferred by the Bill and other measures. The authority enjoys a considerable degree of statutory immunity, which we shall debate in due course.
Even from that brief and inadequate description of the FSA, it is clear that its accountability is an important issue. The authority must be accountable to the market it serves; to those who have paid its expenses through the levy; and to consumers and Ministers—and it must be accountable at law. One safeguard is to ensure the correctness of the FSA's internal management structures—the powers of the directors and chairman and their relationship with each other and the outside world.
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The amendment provides for a separate chairman and chief executive. It has been pointed out that good corporate governance now requires the separation of chairman and chief executive. That was a recommendation of the Greenbury committee, and is still accepted to be how large public companies should be structured.
Against that, it is said that the FSA is not a commercial company in the normal sense of the word. It is a company, of course, but it certainly does not have normal shareholders. On the other hand, many public bodies do have different chairmen and chief executives, the BBC being one. We can all be grateful that there is not a concentration of power in a single person at the BBC. Instead, the director general is, in some senses, accountable to the chairman and the governors. A number of regulatory agencies are similarly structured—the Environment Agency, for example, has a separate chief executive and chairman.
Against that, it has been argued fairly that most foreign financial regulators have combined the two tasks of chairman and chief executive. However, not many overseas regulators have brought together so many powers in one body. It is comparatively unusual for banking supervision to be conducted by the same body as regulates the rest of the market. Clearly, the debate could go to and fro almost indefinitely, and I am not sure if the issue can be decided in that way.
I prefer to look instead and be influenced by more long-term considerations about how the FSA should be run. Also, we should not be too influenced by any particular holder of the office. Howard Davies is the present executive chairman of the FSA. I have a high regard for him, and it is no criticism of him that we believe, as a development in the longer term, that the roles should be split. That was the recommendation also of the Joint Lords and Commons Committee which examined the issue last year.
I emphasise that we are legislating for the longer term. People come and go, personalities change and the regulatory environment alters. We must set up the necessary internal checks and balances to prevent any abuse of power, while ensuring that the FSA is a strong and effective regulator.

Mr. Jim Cousins: It seems from the amendment that what is being sought is for the chief executive to be appointed as a member of the governing body by the Treasury. Is that seriously what the right hon. Gentleman intends?

Mr. Heathcoat-Amory: Absolutely. The chairman is appointed by the Treasury at present, so the chief executive should be. The hon. Gentleman has interpreted the amendment correctly.
I was about to refer to the powers and role of the non-executives; it would enhance their role if they came under a non-executive chairman. That is an important part of the thinking behind our amendments. In other amendments, we want the Treasury, and not the FSA, to appoint the members of the non-executives committee.

Liz Blackman: Would the amendment not split the role as soon as the Bill is enacted and not in the long term? Is the right hon. Gentleman not arguing against his original point?

Mr. Heathcoat-Amory: As I have said, it is not my intention to do anything to change the position of the current chairman, who has another two and a half years in the job. If the Government accepted the amendment, I am sure that they could devise a form of words to give clarity to the thought that the proposal is for the longer term and would not upset the present managerial structure as it affects the chairman.
I conclude by dealing with the role of the non-executive directors. The other amendments in the group are designed to give them and the committee of non-executive directors the additional and stronger functions that they need. Specifically, they should be given the tasks of reviewing and approving the annual budget and of explicitly scrutinising and monitoring the executive management. As the Bill stands, they have several specified functions, but they are somewhat insipid.
I contrast the wording in the schedule with what the FSA believes non-executives should do in the rest of the market. Consultation paper No. 35 helpfully lays out what it believes they should do. Their role should include
assisting their executive colleagues within the firm's governing body in setting, and monitoring, the firm's strategy;
providing an independent perspective to the overall running of the business, scrutinising the approach of executive management, the firm's performance and standards of conduct".
That is a fairly good description of what non-executives should do and it should be reflected in the functions required of the FSA's non-executive members. The amendments would bring the Bill's wording into line with the FSA's view of what non-executives should do.
I hope that I have said enough in this brief introduction to give our thinking about the roles of chairman and chief executive and to put that in the context of what we believe non-executives should do when they are headed, as they should be, by a non-executive chairman.

Mr. Deputy Speaker: I call Mr. Jim Cunningham.

Mr. Cousins: rose—

Mr. Deputy Speaker: I apologise to the hon. Gentleman. I got his name right earlier, so there is no excuse for getting it wrong now. I call Mr. Jim Cousins.

Mr. Cousins: As long as you do not compare me with our famous mouse, Mr. Deputy Speaker.
I shall be very brief in urging Ministers to resist these strange amendments. Their ostensible purpose is to ensure greater accountability to the markets and an independent voice in the FSA. However, the means that they adopt to achieve that objective would increase the Treasury's power of appointment. That cannot be sensible. It cannot


be right that the post of chief executive should be set up as a Government appointment on the FSA; nor is it right, as one amendment suggests, that the members of the non-executive committee, which has the scrutiny role, should also be appointed by the Treasury.
It is absurd that the Opposition should move an amendment that increases the Treasury's power of appointment over the FSA. If their objective is—I can see why it might be and I have some sympathy with it—to strengthen the FSA's accountability to the markets, then the amendments are wholly misconceived.

Sir Nicholas Lyell: I ask the Government to think again on the amendments. They are not about personalities. Howard Davies is widely respected; much is hoped from him and will, no doubt, be delivered. However, history is littered with errors made under the aegis of distinguished, able and well-thought-of people; what is important is to get the structure right in the first place.
The Greenbury report stated that large commercial organisations should have both a chairman and chief executive. There are fundamentally good reasons to have two people at the top, one with the executive role and the other with the non-executive role of chairman. The post of chief executive carries enormous power and responsibility; it is therefore a function that one is happy to see Howard Davies performing. However, where there is both a chairman and a chief executive, the latter has the opportunity to consult the former.
In addition, there are greater opportunities for the world at large and those who are regulated to approach the chairman. It is difficult to make suggestions directly to someone who is doing his best as chief executive at a time when the going is rough and the climate hot. When the chief executive is embroiled in controversy, it is difficult for him to listen as open-mindedly as a chairman can. The chairman has the advantage of being one step back, as well as one rung above. That is a valuable structure, recognised by Greenbury, from which the FSA would benefit.
The same reasoning underlies our amendments dealing with the role of the non-executive directors. A problem at which I hinted during our debate on the order of consideration is that the Bill is inclined to be far too restrictive in terms of the accountability and the opportunity for supervision of the FSA, and of the accountability through the FSA of the Government of the day for the general good management of our financial services industry. Those elements will be strengthened if the role of non-executive directors includes the power to give an independent overall perspective on the running of that enormous institution.

Liz Blackman: Would not the proposals create duplication? Is not what the right hon. and learned Gentleman describes the board's job? Are not non-executive directors members of the board?

Sir Nicholas Lyell: I am not sure whether duplication would result. However, reading the parts of the Bill that our amendments would amend, especially schedule 1, it is striking that the functions of the non-executive directors are deliberately boxed in, largely confined to matters of financial efficiency. I want their role to extend beyond such matters, to that of providing an overall perspective.
I cannot imagine that there will be any objection in principle to the amendments. This debate offers the Government an opportunity to change their mind here and now, or to set the scene for the debate in another place, where such matters will be carefully scrutinised. Our proposals in respect of the chairmanship and the role of non-executive directors are thoroughly sensible and constructive. I hope that they will find favour.

Mr. Tim Loughton: I echo the comments of my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell). The amendments in respect of the role of the board, especially the chief executive and chairman, are in no way personal to Howard Davies. Everyone who has followed the Bill and dealt with the FSA will have great respect for the job that he is doing and the amount of work that he is putting into it. It could be said that he is already doing the jobs of two men—or two women—and I calculate that he is being paid the equivalent of the combined salaries of the Treasury Ministers now present to do them. We are not arguing with the person now in the job. However, the point of principle goes to the heart of our problems with the thrust of the Bill. That is why we laboured it greatly and, I think, usefully in Committee.
As we know, Howard Davies's contract comes to an end in July 2002. Before or after that date, we may or may not be dealing with a different head of the Financial Services Authority. That is one of the reasons why the report of the Burns committee clearly and unequivocally, and with no objection, as I recall, from the members, recommended that the post of chairman and chief executive be separated and that a non-executive chairman be appointed. That is clear in black and white and there was no dispute about the recommendation at the time.
2 pm
I hark back to the comparison with good corporate governance, which my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) mentioned, and the terms under the Cadbury recommendations that there should be
a clearly accepted division of responsibilities at the head of a company which will ensure a balance of power and authority such that no one individual has unfettered powers of decision.
We are dealing with an immensely powerful body—some of us might say too powerful—the head of which, inevitably, can wield a substantial degree of power. The FSA annual report boasts that the FSA, as a structure, complies with Cadbury. That is rather curious given that we have two roles embodied in one person. I gather that in its defence the FSA has complained that having dual heads would complicate matters with the FSA and might compromise the position of the head of the organisation when dealing with overseas counterparts.
I do not see why the FSA should be any different from other organisations, be they companies or Government agencies, which comfortably deal with foreign counterparts with a split of roles at the top. There may be a case for saying that it was justified to have one supremo during a period of turbulence and reorganisation, but not when that period came to an end.
When the Bill is enacted and becomes law, we would like the roles to be split. We would very much welcome Howard Davies staying on in the key role. We are concerned that having one head at the top affects


relationships between that head and the members of the non-executive board. It has implications also for the setting of agendas for board meetings if that is down to one individual.

Mr. Nigel Beard: Does the hon. Gentleman agree that the flaw in the argument that he and his colleagues are advancing, is that they are making an analogy between a normal commercial company and the Financial Services Authority? If a chairman and a chief executive of the FSA had to consider a major investigation, there would be every incentive for investigators at all levels to try to drive a wedge between them. If there were not one authority at the top, there would be a standing invitation to do just that. The circumstances are quite different from those of a commercial organisation. The FSA is far nearer being in the position of an army in the field. No sensible person would consider that the commander of an army in the field should have a chairman above him.

Mr. Loughton: That is an interesting point. I sense a slight change of tack since the hon. Gentleman debated this issue in Committee. I recall that he said then that, unlike the case with commercial companies, the head of a regulatory organisation needs to be able to act swiftly, overnight or whatever. I disputed that. A regulatory organisation is no different from a large multinational company, which needs to act quickly in a takeover. However, the hon. Gentleman now takes the tack that there may be division between the two people at the top.
If the FSA does its job properly, it will be able to agree cabinet and committee responsibility, and the chairman and the chief executive should be singing from the same song sheet. If there were two roles, there would be two views, at least behind the closed doors of the FSA, in the committee meetings to decide policy. Those views could provoke a proper, full debate, and a single resolution, which would become the FSA's policy.

Mr. Cousins: The hon. Gentleman has already drawn attention to the chairman's appointment by the Treasury and made a point of mentioning his substantial salary. The amendment suggests that a chief executive should be appointed by the Treasury, also on a substantial salary. He suggests that in public, the chief executive and the chairman should agree, but that they should be allowed to disagree privately. If a Labour-controlled Much Binding in the Marsh district council did that, the hon. Gentleman's view would be different.

Mr. Loughton: I appreciate that Labour Members are not given much opportunity to disagree. They are given a line, which they have to feed to everybody. There is no problem if non-executive directors, chairmen, or executive managing directors of the FSA want to disagree among themselves. That is how policy is made, although events in the House in past few days suggest that the Government do not like policy to be made in that way. I do not understand the problem that the hon. Gentleman tried to identify.
There is a danger of the financial services industry becoming personified in the figure of Howard Davies because he is such an important one. I wanted to discover

why the FSA should be different not only from commercial companies but from other quangos and Government agencies and companies, so I did some research. There are numerous examples of bodies—for example, the Environment Agency—which have a chairman, a deputy chairman and a chief executive. My right hon. Friend the Member for Wells mentioned the BBC. Divisions of responsibility between chairmen and chief executives exist in other regulatory bodies—for example, in the Investment Management Regulatory Organisation, the Securities and Investment Board and the Securities and Futures Authority.
Much of the Bill was based on the experience of self-regulating organisations. Why should the FSA be different? Logic tells us that it should not be different because it is much more powerful than the other organisations that I mentioned. Investing so much power in one person in that more powerful body is dangerous.
A host of other organisations routinely divide responsibilities; for example, the New Millennium Experience Company Ltd, which the Government would doubtless like to support, the new opportunities fund, the Occupational Pensions Regulatory Authority, the Criminal Cases Review Commission and the Youth Justice Board for England and Wales. Those organisations have regulatory powers, albeit not on the scale of the FSA, and have always divided responsibilities between chairmen and chief executives.
One has to do a great deal of research to uncover organisations that do not have such a split. The Library provided me with only two examples: Trinity House Lighthouse Service and the Central Laboratory for the Research Councils, whose chairman and chief executive are embodied in the same person.
The Bill provides for an exception. That is why we argued so hard, but fruitlessly, given the attention that the Government paid to our arguments, in Committee. I strongly support amendment No. 19, because its principle goes to the heart of the FSA's accountability.
The other four other amendments in the group deal with the appointment of non-executives by the Treasury. The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) thought it more dangerous for the Treasury to have the power to appoint all those people, but if a system is working properly—which it should be, but which it does not always do under the Government—the Treasury is scrutinised by Parliament. We have the power, through debates in the Chamber or Select Committee procedure, to scrutinise the Ministers who make those decisions as to whether appointments are just and efficient. I do not see why the hon. Gentleman fears that process, because the House already has such powers and we are trying to open them up to even more scrutiny.

Mr. Cousins: The hon. Gentleman must see that the issue here is accountability to the markets, which must feel that they have some influence on the conduct of the FSA. Such close, fine-grain operational intervention by the Treasury—to the extent that even the members of that important non-executive committee are also appointed entirely by it—is wholly absurd.

Mr. Loughton: The hon. Gentleman holds an interesting personal view, but if he had followed our discussions in Committee he would not necessarily take


such a line. I am afraid that the FSA, certainly in respect of the Bill, is not accountable only to the industry by any manner of means. We have tabled amendments and new clauses, to make it more accountable in terms of the charges and additional regulation that it might place on the industry.
I fear that the vast majority of our deliberations in Committee have not been taken up by the Government, and I am sure that the hon. Gentleman agrees with my concern. If they do not want to make the people running the FSA more accountable to the industry they are regulating, we must make sure that they are accountable not behind closed doors, but to the House. That is the whole point of amendment No. 20.
As my right hon. Friend the Member for Wells said, amendment No. 54 would give the non-executives a greater role in reviewing and approving the budget. It is essential that other people—the non-executive directors—have greater powers of scrutiny over the value for money offered to the industry by the FSA and over whether its budget is either sufficient to do its job properly or too generous, resulting in the industry's being penalised by excessive regulation.
Amendments Nos. 21 and 22 do no more than echo the words of consultation paper No. 35 from the FSA on senior management arrangements, systems and controls. Their wording is almost identical to section 4 of the paper. If the FSA seeks powers and the Government want to give it powers to meddle—some might say—in the internal structures used by member firms to arraign their management and go about their business, surely one should at the very least expect the senior FSA board members who are setting down the regulations to adhere to the same standards and requirements. That is purely a matter of consistency, which is why we were surprised that the Government did not wish to take it up when we raised it in Committee and before.
We are considering important amendments—some might say the most important—at this early stage because they go to the heart of the accountability of the organisation and, in particular, the people who will be responsible for it and keeping a check on its budgets and the number of regulations it produces. The person who runs it now has charge of at least 2,000 people, and if mortgages are to be regulated as well, he will have charge of an awful lot more. That person has enormous power and it is only right that it be properly shared and scrutinised, and, more important, that it should be seen to be properly shared and scrutinised. Ultimate accountability should be to the House.

Mr. Andrew Tyrie: I have just been given a redraft of part of the Bill, which those on the Treasury Bench have kindly provided. This gives a feel for the scale of the redrafting, which is being done on the hoof. None of us has had the remotest chance to absorb the draft—we are receiving it as I speak, which is extraordinary. Frankly, it is disgraceful and disrespectful to the industry that we are trying to regulate.
The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) was on the right track, but not with respect to schedule 1. He is absolutely right that the Treasury has huge power under the Bill, and that that power should be diminished. He is not right that the Treasury power of appointment over a chairman and a chief executive is necessarily wrong. [Interruption.] I shall give the hon. Gentleman the opportunity to intervene in a moment.
2.15 pm
I strongly support the sentiment behind the hon. Gentleman's interventions and urge him to read the last subsection of clause 10. He will see the extent to which the Treasury is being given powers. He should also consider clause 372—a jumbo, omnibus, sweep-up clause that ensures that the Treasury can do exactly what it likes, notwithstanding the preceding 371 clauses. If he looks at the last subsection of a number of other clauses, he will find that, in case the draftsmen have got it wrong, the Treasury can vary matters by order without interference from anybody else, least of all the House or the hon. Gentleman.
I want to discuss a few matters that have not been articulated by my right hon. and hon. Friends. We need to be clear that we are creating a leviathan—an institution of unprecedented power and authority. If it had not been for the Burns committee report—which flagged up the extent to which the Financial Services Authority was effectively becoming judge, jury and executioner—we should have had an even more inadequate tribunal procedure. None the less, the chairman of the authority will still be able, in the mere blink of an eye, to close down businesses, destroy reputations and impose heavy fines. While doing all that, he will have virtually complete statutory immunity. We shall have a new tier of the judicial system—the court system will have a new financial judiciary system sitting alongside it. I am not yet convinced that that is the right way to go.
We are creating the most powerful body in this country after the Government, which is why it is crucial that there should be some check on the powers of the chief executive or chairman of such an authority. Someone to whom aggrieved parties can explain their concerns independently should be looking over the Executive director's shoulder, acting as a long-stop in the event of illness or something more serious. Leaving all that power in the hands of one man is not a reasonable way to go. My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) referred to a passage from the Cadbury report, which is very relevant, which says that it is certainly right for companies and corporate bodies to have a division at the top between a chairman and a chief executive.
I reiterate the point made by my hon. Friend that Howard Davies is a very good chap. I have known him a long time and am I sure that he does an excellent job. I more or less took over from him as special adviser in the Treasury to Nigel Lawson. In those days, he was identified as a political adviser to the then Conservative Government, but is now a much more neutral figure, particularly as he attached his name to the Rowntree report on inequality when Director General of the Confederation of British Industry. He has done, and will continue to do, an outstanding job. He, among others, has articulated three arguments as to why he does not see why he should have someone looking over his shoulder.
The first argument is that comparable international bodies do not have somebody looking over their shoulders. The only remotely comparable body is the Securities and Exchange Commission in the United States, but it deals with a small proportion of what the FSA will be required to deal with. That is not a genuine comparison. We are dealing with something new and we


are in uncharted territory. We are dealing with a rule-making, self-sustaining body on a scale that we have never had in the United Kingdom.

Liz Blackman: Why does the hon. Gentleman persist in minimising the considerable expertise and distinction of the board members, executive and non-executive? His line of argument seems to suggest that the board is a mere puppet. That is not and will not be the case. Does he accept that argument?

Mr. Tyrie: I have not yet mentioned the board, but I promise to do so before I sit down. If I may, I shall deal with that point when I come on to our other amendments that would strengthen the hands of the non-executive directors.
The second argument made by Howard Davies and others is that to make the memorandum of understanding between the Treasury, the FSA and the Bank of England work, we must have one clearly identifiable person in charge to deal with problems if they turn swiftly into crises. It is argued that we must not have responsibility so split that nobody knows who is responsible for what. I have read the memorandum and that argument does not remotely wash.
There is indeed a division of responsibility, but the main problem with the memorandum is not a putative division of responsibility within the FSA, but the division of responsibility between three groups. It will often be the FSA's job to spot early when trouble may arise in a particular firm which may generate a serious prudential or systemic problem. It is the Bank of England's responsibility to suggest and put in place a support operation and to take any action that may be required to deal with systemic risk, which may include the adjustment of interest rates in conjunction with the Monetary Policy Committee. The Chancellor is responsible for all of that to Parliament.
Furthermore, in a provision tucked in the middle of paragraph 13 of the memorandum, which has not been given remotely enough attention, we discover that the Chancellor has the option of refusing to support a given action. In other words, he has the power of veto over the other two bodies. We have, then, real scope for confusion built into the memorandum. As yet it is wholly untested. If it is tested, I worry that it might be found wanting. That is the real division of responsibility that could create problems, not any putative division of responsibility between a chairman and a chief executive of the FSA.
The third and often heard argument is a general point about accountability—that nobody would be sure to whom they should go. That is highly implausible. It does not seem to obstruct the workings of all the institutions listed by my hon. Friend the Member for East Worthing and Shoreham. They seem to be able to cope well. Indeed, so far as I know, none of them has made representations to the effect that they want to do away with the chief executive- chairman split because it makes their work difficult. Nor, indeed, did Howard Davies seem to find it difficult with such a split when he was at the Audit Commission. When he was Controller of Audit of that powerful institution, he had a chairman above him who was looking over his shoulder and to whom ultimately he

was answerable. It is a well-established, intelligent and effective structure, not only for all businesses and many public sector bodies, but for the nearest we have to a powerful institution which has been headed up by Howard Davies.

Mr. Beard: Having had the responsibility in the Treasury under the previous Government that he mentioned, can the hon. Gentleman say why it was appropriate to have regulators for all the public utilities—single people regulating in similar circumstances to the head of the FSA—with no equivalent chairman, whereas when it comes to a general responsibility for the City there is suddenly perceived to be a need for a chairman to provide safeguards? Why is there that distinction?

Mr. Tyrie: There is a massive difference between a water regulator and a regulator of the financial services industry. For those who are interested, a large part of that debate took place in Committee, where the hon. Gentleman made exactly the same point. Rather than go through all the arguments now—

Mr. Beard: Will the hon. Gentleman give way?

Mr. Tyrie: If the hon. Gentleman will forgive me, I will not give way a second time. I should like to get on.
The Joint Committee report is unequivocal in its recommendation that for the longer term we must have a split. I do not know whether anyone has read out the exact words—

Mr. Loughton: Yes, I did.

Mr. Tyrie: My hon. Friend says that he did. The recommendation is clear. However, we should not take that as gospel or writ. It is an indication—a group of people thought carefully about the subject and came to that conclusion. We should be able to judge for ourselves. We need to ask ourselves a few simple questions. Do we really think that the head of the FSA will be hamstrung if he has a chairman above him? Do we think that foreign regulators will look down on him because he has a split role—because there is a chairman and a chief executive? Will it demean in any way our system of financial regulation? Do we think that having a split will increase problems in a financial or systemic crisis, given the huge lacuna in the memorandum of understanding which would cause that confusion and which is of far greater proportions than any conceivable consequence of the chairman-chief executive split?
The arguments are all the weaker given the drafting of schedule 2(4), which sets out the functions of the non-executive directors. I will not linger on this point for long because I want to be brief, but it is clear from the drafting that it is intended to exclude the non-executive directors from fundamental scrutiny and monitoring of the overall workings of the authority. The amendment would put that back. We are trying to act on both issues with our amendments. That must be the way forward, and I commend the amendments to the House.

The Economic Secretary to the Treasury (Miss Melanie Johnson): As hon. Members have persisted in their remarks about amendments and the degree of change


in the Bill, I must make one point in response. The vast majority of Government amendments were tabled last Friday. Although this week we missed Wednesday officially in this House, its 24 hours nevertheless existed in reality, so the calculation of 72 hours made by the hon. Member for East Worthing and Shoreham (Mr. Loughton) is a gross understatement of the amount of time that the Opposition have had to deal with the matters before us today.

Mr. Tyrie: We were not here on Friday. More fundamentally, will the Minister explain why it was not possible to table the amendments a little earlier, or have the debate a week later, to give us a fortnight to consider what are serious matters, particularly as we have tried, as much as possible, to move forward on the basis of all-party agreement? Discussion of the Bill has not been highly adversarial.

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. If those matters were to be raised at all, they should have been raised under an earlier item on today's Order Paper. That debate has taken place. Perhaps the Minister might return to the substance of the amendments.

Miss Melanie Johnson: I am forced to take that advice, Mr. Deputy Speaker, but we co-operated with the Conservative Front-Bench team. As Front Benchers know full well, there has been considerable co-operation on all these matters. I see the right hon. Member for Wells (Mr. Heathcoat-Amory) nodding.
On the issues of substance, first, there is accountability. It is important that there is a single public face of the FSA, a single chief point of contact who is accountable to the Treasury and can be called before parliamentary Committees—a single person with whom the buck stops.
Conservative Members have argued that accountability is important. I agree, but my experience is that, where roles are confused and more than one person could be said to be responsible for something—as might happen with the proposed split between a chairman and a chief executive—it can easily confuse the clear chain of accountability, blur the lines as to who is responsible for what, and create doubt as to the authority of any one person to represent the FSA and, ultimately, to carry the can, including being accountable to the Treasury and hon. Members.
Secondly, we need to ensure that there is a person with the wherewithal and authority to lead the FSA both in its daily business and in the international arena. The FSA is a major player on the international regulatory stage. We want it to stay there. That is an important aspect of its current role.
Virtually all other major international financial regulators—Conservative Members skated over the point hurriedly—are represented by full-time executive board chairmen. Those are the arrangements. They are public representatives of those organisations. It is important that the FSA is represented by a person of appropriate and equivalent stature in those arenas.
Some have suggested that the roles of chairman and chief executive could be split to reflect current thinking on corporate governance. Several Conservative Members dealt with that question, but parallels with ordinary

companies are far from exact. The combined code is designed for companies with shareholders who do not benefit from the various accountability checks and balances provided for by the Bill.
The spirit of the code is that there should be a strong non-executive element on the board. We have more than provided for that. There will be a majority of non-executives. The non-executives will form a committee to keep under review whether the FSA is discharging its functions in the most efficient and economic way; to review the FSA's financial controls; and to determine remuneration. On top of that, there is a range of other accountability measures that a normal company would not have.
The board will be appointed by the Treasury and subject to transparent appointment procedures. There will be an annual report to Parliament, which is an important part of the accountability mechanism, and an open annual meeting, at which stakeholders can air their concerns. We have built in practitioner and consumer panels, which will be consulted on FSA general policies and practices. Last, but by no means least—it is one of the most important aspects—there are the principles and objectives that guide the way in which the FSA, and hence its governing body, will act.

Mr. Howard Flight: The Minister said that the board would be appointed by the Treasury. Will she clarify the matter? Our amendment was intended to achieve that, but surely the schedule requires the authority to appoint the governing body. If the authority does that, it will be able to appoint its chums.

Miss Johnson: I confirm that the Treasury appoints the board and will do so in line with transparent Nolan-type procedures, if that helps the hon. Gentleman.
There are other reasons why I will not accept the amendments. First, the tripartite arrangements between the Treasury, the Bank of England and the FSA are based on relationships between the organisations and their heads. It is hard to see how the FSA could easily be represented in the forum by a person with appropriate stature—

Mr. Tyrie: Further to the Minister's statement about who will appoint the non-executive committee, may I seek clarification? Paragraph 3(2) of schedule 1 reads:
The members of the non-executive committee are to be appointed by the Authority.
Do the Government intend to table an amendment to change that, so that henceforth they will be appointed by the Treasury?

Miss Johnson: I will come back to that point. May I finish the points that I was making because I started with a "first"? I want to round off my comments about the special factors to be taken into consideration.
Secondly, as the non-executives on the FSA board have said, the organisation is mature enough not to be merely a creature of its chairman. I am grateful for the comments of my hon. Friend the Member for Erewash (Liz Blackman) about the way in which Conservative Members suggested that the board was a mere cipher and rubber stamp for the organisation. Quite the contrary; I have been to board meetings and met board members on several occasions.


It is not the case that board members are anything other than extremely competent and professional. Many views are expressed at the meetings.

Sir Nicholas Lyell: This is the moment for me to ask the Minister to clarify the point that I raised in my speech. I described paragraph 4(3) of schedule 1 as boxing in the non-executive functions: the non-executive committee will review simply whether the authority is using its resources in the most efficient and economic way. She is speaking as though the committee had an overall remit of the type that we recommend in our amendment. What is she saying? Are they boxed in by paragraph 4(3) or are they not?

Miss Johnson: Perhaps I could come to the point that the hon. Member for Chichester (Mr. Tyrie) raised before coming to the right hon. and learned Gentleman's point? The Treasury appoints the members to the board. The FSA has to ensure that they form a committee under paragraph 3. Paragraph 2(3) is the one that the hon. Gentleman should look at. The FSA appoints the non-executives. Perhaps that clarifies that point. [Interruption.] I am looking at the text of the Bill. Paragraph 2(3) states:
The chairman and other members of the governing body must be appointed, and be liable to removal from office, by the Treasury.

Sir Nicholas Lyell: Hansard will record that the Minister said that that was done by the authority. Now she has rightly read out that it is done by the Treasury.

Miss Johnson: I am talking about the non-executive committee, which must have the paragraph 4(3) functions. It will also be open to the FSA to confer functions on the committee. Therefore, paragraph 4(3) does not box in the committee; it does quite the reverse.

Sir Nicholas Lyell: Will the Minister please explain why it does not box in the committee? She has received a note from those who are assisting her saying that it does not box in the committee, but why is the provision so carefully confined?

Miss Johnson: I shall deal with that point in a moment but should like first to deal with the point made by the hon. Member for Chichester on how the Government have dealt with some of the matters.
Amendment No. 19 is worded very flexibly, so that the split between the chairman and the chief executive could be undertaken in the longer term—I see the hon. Member for Chichester nodding. However, I still do not agree with the amendment, as it raises the real issue of who would allocate the roles and how they would be allocated. We have other objections to splitting the roles of chairman and chief executive, but Opposition Members have not dealt with them in their amendments.

Mr. Tyrie: Will the hon. Lady explain briefly why the FSA is such a unique structure that it cannot have a division of roles? It would be done by the Treasury if the flexibility provided in the paragraph to which she referred

were used. Why are all the other bodies that have been mentioned perfectly able to cope with such a split and function happily, whereas the FSA cannot?

Miss Johnson: Will the hon. Gentleman repeat his last sentence?

Mr. Tyrie: Why are all those other bodies able to cope with a division of roles and find a way of dividing responsibilities between chairman and chief executive, whereas the FSA is held to be so unique that it would be incapable of doing so?

Miss Johnson: The Financial Services Authority is unique in many respects. However, it is not unique among regulators. Nor is our proposal unique among arrangements made for other international regulators. Our proposal is exactly in line with the structure of other major international regulators, which are not splitting the roles. The roles should remain combined, as we have proposed.
I should like to deal with some of the points that Opposition Members have made about the current incumbent of the post, Howard Davies. I share their enthusiasm for him and the way in which he is discharging his role, although I was a little alarmed by some of their remarks that he might leave after his contract ends, if not before. Nevertheless, the Government's arguments depend not on the current incumbent and his many undoubted qualities, but on the fact that we do not think that it is appropriate or right to make the split.
I should like briefly—I may test your patience temporarily, Mr. Deputy Speaker—to point out to the hon. Member for Chichester that the redrafts of explanatory material on amendments that he was waving deal with specific matters in which Opposition Members had expressed an interest in Committee. It is highly technical material, and we expect to deal with it not today, but on Tuesday. I regret that however helpful the Government have been on the Bill—we have tried to be extremely helpful, recognising as we do the many helpful contributions made by Opposition Members—some of them, such as the hon. Member for Chichester, seem unable to deal with that helpfulness.
2.45 pm
I tell the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) that paragraph 4(3) does not box in the committee because the FSA can confer further functions. Paragraph 4(3) simply specifies the minimum functions. If the right hon. and learned Gentleman still thinks that the provision boxes in the committee, perhaps he would like either to raise the issue later in the debate or to write to me.

Mr. Flight: Hon. Members on both sides of the House seem to be joining in the love-in for Howard Davies and the good job that he has been doing. After publication of the Bill, it was reported that the Treasury had taken the view that it was better to have a split between non-executive chairman, chief executive and principal, but that the Government were leaving the provision as drafted largely in deference to Howard Davies. Indeed, after the Bill was published, Lord Burns confirmed his judgment that the Government would have to look again at the unified role.
I do not want to repeat other arguments, but shall deal with the crucial points. The Investment Management Regulatory Organisation model worked extremely successfully. A non-executive chairman is not someone competing to be chief executive or to be accountable, but a person of wisdom and experience whom the chief executive can consult on difficult issues, and someone who could protect the chief executive if he or she were being leant on by Government.
I cannot resist raising a fairly major issue that is currently in Howard Davies's hands for decision. As the House will know, IMRO launched a major investigation into London and Bishopsgate, the Maxwell investment management company. Quite correctly, the investigation was not published at the time, as proceedings were pending against the Maxwell brothers. Now, the decision on publication must be taken. The Opposition argue that, in the interests of accountability and openness, it should be published. That is precisely the type of matter in which a chief executive should be able to draw on the wisdom of a non-executive chairman before taking a decision, and to seek support in dealing with Government attempts to lean on him or her.

Mr. Barry Sheerman: I was the Deputy Chairman of the pre-legislative inquiry. Before the hon. Gentleman assumes too much—that there was a clear political split on the issue—I should tell him that several Committee members had reservations about splitting. I took Lord Burns's view, and rather reluctantly came to the conclusion, as it was shared by the majority of Committee members, that, for now, the role should be kept as one.

Mr. Flight: We know that there are arguments on both sides. The Opposition accept that, during the reign of the great Howard Davies, it is sensible to keep the role unified. We accept that there is much to be done in establishing the body and addressing all the issues.
We tabled amendment No. 18 because, after examining all the issues, we believe that Parliament should signal that, in the longer term, it would be wiser to have a non-executive chairman. We had thought that the Government shared that view because, as hon. Members will note, the Bill uses only the word "chairman", thereby leaving the door open to a subsequent split.

Liz Blackman: The hon. Gentleman should be aware that, although many of the witnesses appearing before the Joint Committee were practitioners who favoured not splitting the role, none of them cited Howard Davies's personality as a factor in forming their view. They said that the position should remain one for reasons of accountability and clarity.

Mr. Flight: I thank the hon. Lady for that intervention. I was not a member of the Joint Committee, and it was not my impression from the report that its contribution was so large. The issue is simple, and we concede that both sides of the argument have merit. We prefer the IMRO model and believe that the non-executive chairman position has advantages and does not damage the authority of the chief executive. However, others argue otherwise.
The case that the authority of a chief executive is damaged by the appointment of a non-executive chairman is not proven by experience. However, the opposite

case—that a chief executive without a non-executive chairman may have too much power and be unaccountable in the absence of a person to consult with—can be illustrated by experience.
If amendment No. 22 is not accepted, the role of the excellent non-executive board will be emasculated because it will not be given the normal duties and responsibilities—as set out under the Cadbury guidelines—to scrutinise and monitor the work, performance and standards of conduct of the FSA executive management. We see no reason why those activities should have been excluded from the non-executive board's role.
The question of who appoints whom deserves consideration. As I thought, the authority, not the Treasury, will appoint the non-executive members. Our objection to that is that a chief executive without a chairman clearly has the power to appoint his cronies. Despite all the problems described earlier, the Treasury should make those appointments, not the FSA. Perhaps it would be better if industry representatives were to nominate members, but the Government's intention was to move away from self-regulation. Therefore, we believe that, for the time being at least, the Treasury option is to be preferred.

Mr. Beard: Where in the Bill are the powers of the board circumscribed in the way that the hon. Gentleman has set out?

Mr. Flight: My point is that the roles and duties of non-executive directors that I described—and which appear in the standard list recommended by the FSA—are not included in the Bill. That is not to say that they could not be added in the future, but why on earth exclude now what are the proper and normal roles of non-executives?

Mr. Cousins: I draw the hon. Gentleman's attention to paragraph 5(1) of schedule 1, which deals with this matter. It correctly leaves to the authority the responsibility for devolution of function and powers in the authority.

Mr. Flight: That reinforces my point that it should not be for the authority to make its own constitution. Schedule 1 deals with the constitution of a body entrusted with running the financial services industry. I do not see how what the hon. Gentleman said interferes with the straightforward proposition that the constitutional role of the non-executives should be set out clearly in the relevant part of the constitution.
We wanted to put on record what we consider to be the right constitutional structure, which we hope the FSA will move towards. That will have to await the end of the reign of Howard Davies, and can be dealt with subsequently. The Government do not want to admit it, but the Bill is drafted with enough flexibility to cover that. However, we have not been persuaded by the arguments advanced by the Government and Howard Davies in favour of having a single chief executive.

Sir Nicholas Lyell: With permission, Mr. Deputy Speaker—

Mr. Deputy Speaker: Order. I am afraid that the right hon. and learned Gentleman cannot speak a second time. Only the person who has tabled the amendment can automatically speak a second time on Report.
Is the hon. Member for Arundel and South Downs (Mr. Flight) pressing the amendment?

Mr. Flight: I thought, Mr. Deputy Speaker, that I had indicated in what I just said that we would not press the amendment to a vote.

Mr. Deputy Speaker: Is the hon. Gentleman therefore withdrawing his amendment?

Mr. Flight: I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Miss Melanie Johnson: I beg to move amendment No. 480, in page 197, line 47, at end insert—
() The complaints scheme must be designed so that, as far as reasonably practicable, complaints are investigated quickly.".

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 186, in page 198, line 27, leave out "reference" and insert "submission".
No. 187, in page 198, line 27, leave out—
which the Authority is investigating".
No. 23, in page 198, line 33, leave out "and".
No. 32, in page 198, line 36, at end insert—
;and
(iv) to recommend to the Authority the award of such sum as appears to him to be fair and reasonable in all the circumstances of the case in relation to any maladministration by the Authority.".
No. 188, in page 198, line 36, at end insert—
(iv) to make an award against the Authority of such amounts as he considers fair compensation for loss or damage resulting from the subject matter of the complaint".
No. 189, in page 198, line 37, leave out "Authority" and insert "investigator".
No. 190, in page 198, line 37, leave out—
it must notify the investigator
and insert "must notify the complainant".
No. 191, in page 198, line 39, leave out sub-paragraph (4).
Government amendments Nos. 437 to 441.

Miss Johnson: The complaints scheme is an important part of the accountability package delivered by the Bill. The Bill should deliver an open and transparent mechanism that will allow people's complaints to be dealt with quickly, cheaply and informally.
However, the Bill delivers other important protections as well. For example, firms will be able to go to the financial services and markets tribunal to challenge the FSA's decisions. The Government introduced amendments to the complaints scheme provisions following the Joint Committee's recommendations, to make it clear that the investigator should be fully independent of the FSA. That independence will include having adequate funds and staff.
The investigator's appointment is also to be approved by the Treasury, and he or she cannot be removed from office without the Treasury's consent. It is important that

everyone is happy with the independence of the arrangements, and the FSA will consult further on them fairly shortly. I understand that the issues to be studied are likely to include ways to secure the investigator's independence through the appointment arrangements and the provision of independent support staff. I recognise how important it is to secure the investigator's independence. The Government amendments, together with the provisions already in the Bill, will achieve that.
I shall not respond to the Opposition amendments now, Mr. Deputy Speaker, in the hope that I will have the opportunity to do so later.

Mr. Flight: rose—

Mr. Deputy Speaker: Order. Perhaps I can help the Minister. By leave of the House, she is able to speak a second time, as she would be were she tabling her own amendment. However, it may be for the convenience of the House were she to say all that she wishes to say on this occasion, in case she wishes to come back a second time later.

Miss Johnson: Thank you for your guidance, Mr. Deputy Speaker. I shall take this opportunity to make some brief remarks about the Opposition amendments in this group.
The amendments would partly take the FSA out of the process—or at least, they would not give it the opportunity to deal with complaints in the first instance. The Government consider that it would not be sensible to take the FSA out of the process in the way proposed. Most complaints arrangements—such as those relating to regulating firms under the current system—give the subject of the complaint the chance to put his house in order before an independent investigator is brought in. What would be the implications for the time and resources of the investigator if he or she were to investigate all complaints in the first instance? We are trying to set up a mechanism for cases which the FSA cannot resolve with complainants, not a first port of call, and not a port of call for every single case that might arise.
3 pm
The scheme nevertheless ensures transparency, so if the FSA decides not to investigate a complaint, the investigator should know about it; and if the authority decides to go ahead and investigate, again, the investigator should be informed. The investigator can then take up the complaint if he or she sees fit.
Of course, if the FSA does not sort out a complaint satisfactorily, the independent investigator comes in. Taking the FSA out of the picture in the first instance would not be right or efficient.
The Joint Committee suggested that we consider the possibility of ex gratia payments. We have been doing that, and we continue to do so, but it is not appropriate to come to a decision until we see the FSA's consultation paper on the proposed arrangements for the complaints scheme. Amendment No. 188 argues for just such compensation.
It is important that the complaints scheme is not seen as a means of circumventing the FSA's statutory immunity. We do not want to encourage people to take


pot shots at the FSA and distract it from its proper business of regulating. As the scheme is not part of the Court Service—indeed, the investigator need not be a lawyer—he or she would not necessarily come to a decision based on legal principles that a court would apply. The complaints scheme is an informal mechanism for investigating complaints and, where appropriate, bringing shortcomings into the open; it is not a court, nor is there a right of appeal for the FSA if the investigator makes an adverse finding against it.
Although the Bill does not give the investigator the power to award damages, the complaints scheme will have real teeth. The investigator can publish his or her reports and has the power to name and shame the FSA—or, if he or she sees fit, individuals within it. Therefore, the strength of the arrangements should not be underestimated. The FSA will also need to include details concerning complaints in its annual reports to the Treasury and to Parliament.
I hope that, once they have considered my remarks and the Government amendments, hon. Members may see fit to withdraw their amendments in this group.

Mr. Flight: Government amendment No. 480 is quite acceptable. It responds to an issue that we raised about speeding up the handling of complaints.
We are now in the single most important territory of principle. As the Burns committee set out in its doctrine, and as has been the universal response from the industry, if there is to be effective legal immunity, there must be a clearly independent system of complaints—if not with the ability legally to award compensation, with the ability to recommend and suggest fair recompense when businesses have been damaged by incorrect or wrong conduct by the FSA.
As the Minister has just said, in Committee the Government accepted the principle that the investigator could suggest ex gratia payments. There is no Government amendment to that end, and the Minister has said that the matter is still under consideration, awaiting the FSA's comments. We ourselves have had discussions with the FSA on this issue. It pointed out that, if the payments were compensation, there would be a potential problem of legal disputes, particularly over matters such as the refusal of applications, but it is perfectly happy with the principle of ex gratia payments being recommended to it. Amendment No. 32 has been worded deliberately to accommodate that. It proposes that the investigator recommend suitable sums for payment by the FSA, so that it will ultimately be an ex gratia regime.
We will wish to withdraw amendment No. 188, which is clearly stronger, and sets out a specific proposal for compensation. Our other amendments seek to create a complaints regime that is fully independent. While there may be something in the argument that the complaints investigator's time should not be wasted with minor issues, the bigger argument is that it is inappropriate for all complaints to come to the FSA first. The FSA has the power of life or death over businesses in terms of authorisation. There is considerable fear of the FSA in the industry—fear that, if offence is given or a foot is put out of line, a business may suffer. It is therefore inappropriate that complaints should first be vetted by the FSA. The investigator needs to be fully independent to receive and consider complaints, and recommend recompense if a business has been genuinely damaged by a wrong action by the FSA.
We shall come in due course to the issue of legal immunity. The two issues might best have been debated together, but it is absolutely clear that, in achieving a fair and sensible balance of power—if there continues to be effective legal immunity, as the Bill at present prescribes—it is essential, as the Burns committee made clear, to have an independent system of complaints, and for the body concerned to be able to recommend, if not award, fair payments for damage suffered by businesses as a result of the FSA's mistakes.

Sir Nicholas Lyell: I agree with the points made by my hon. Friend the Member for Arundel and South Downs (Mr. Flight), including those about the importance of having an independent investigator who can award compensation, of at least a reasonable nature.
My hon. Friend pointed out that our amendments are in two forms—amendment No. 188, which requires that the investigator be able to award compensation, and amendment No. 32, which requires that he or she be able to recommend an award of compensation, leaving the ultimate decision to the authority. To that extent, it would be ex gratia. We put that in to water down our recommendation, to make it easier for the authority, and to stop it being frightened that its immunity would thereby be completely undercut.
We are the Opposition, not the Government. The Government need to reflect seriously and carefully on exactly how to handle this matter. I echo my hon. Friend's statement that the recommendation was made by the Burns committee, which gives it great weight, just as the committee's views on the chairmanship and the question of chairman and chief executive gave that great weight. I hope that both those matters will be reflected on extremely carefully.
This group of amendments and the next group, on immunity, hang together, as my hon. Friend rightly said. The Minister knows that I support a substantial degree of immunity for the FSA. I think that it is necessary, for the reasons that my hon. Friend stated. We do not want to see the authority undercut, and, as the Minister said, we do not want unreasonable pot shots. They may be much more than pot shots; they may be major attacks by extremely powerful institutions.
That is one side of the picture. The other side is that the FSA is being given immense power over the livelihoods of thousands of people whose own money is at risk. If it performs its functions badly, it should be capable of being held to account. If it does significant damage to individuals working in the market through its own fault, there should be some comeback and some financial compensation. The authority is big enough to be able to behave properly to those whom it has a duty to regulate, but whom it has let down as a result of inadvertence, stupidity or worse.
I hope that that will not happen very often, but I would feel much more confident about its being a rare occurrence if I knew that the authority was aware that it must look over its shoulder, at least to a limited extent, and realise that if it messes up those working in the market or others through its own incompetence or error, it can be held reasonably to account for at least reasonable sums to return them to the position in which they ought to have been.
We are setting up a huge institution. What we are doing is unprecedented. We really must be big about it: we must not be frightened—Governments, whatever their


complexion, must not be frightened—to be prepared to pay compensation to those who suffer when misregulated. There is no reason why the whole regulatory system should collapse as a result of that balance.
If we do not get this right, Strasbourg may eventually force us to get it right. One of the problems of this Bill is that it is so defensive about the idea of judicial review. Nearly every provision that could be drafted so as to inhibit the opportunity for judicial review is thus drafted. It will not prevent judicial review on the part of financial institutions that are rich and powerful enough to afford that expensive and complex process, but judicial review would be far less necessary if the system involving the investigator and reasonable compensation were established properly.
I am in favour of that system. I am in favour of a comparatively formal process. However, if it is so boxed in—if I may use another contentious phrase—that it is not effective, people will look outside it. Eventually, they will take the cases to Strasbourg. They will rely on article 6 of the European convention on human rights in relation to lack of due process, on article 7 in relation to the right not to be punished except in accordance with the law, and on the first protocol of article 1, which relates to the right to possession of property. If someone is running a business that is also his property, and if that business is seriously damaged as a result of the authority's incompetence, possession of the property may be denied him. In one way or another, people will find a way of bringing a case outside the confines of this country.
Let us get the legislation right. Let us ensure that it is reasonable and balanced.

Miss Melanie Johnson: We are still considering the issue of ex gratia payments. The FSA is consulting on it, and I do not think it appropriate to pre-empt the results of its consultation. I am not saying that we will decide one way or the other; I am saying that we are waiting for the results.
I do not think that people should view the complaints investigator as a potential first port of call, as the Opposition seem to suggest. In any event, the post is not being established for the purpose of financial redress; the point is for the focus to be on the process, and on the importance of transparency.

Mr. Heathcoat-Amory: We have had a short but important debate on some important amendments.
The Opposition consider the investigator's role to be crucial in providing a check on any abuse by the FSA, and any negligence or incompetence on its part. We may have regard for, or even confidence in, the authority's senior management, but that is not always reflected in people's experience of its staff at the coalface, as it were.
Hon. Members receive many complaints about regulators. It is important for complaints to be dealt with promptly by an independent inspector who is seen to be independent, and who can receive them separately from any filter mechanism that may exist in the authority. The inspector must be properly resourced, and able to respond to complaints—including, we believe, complaints involving financial awards against the authority.
Our proposals would also establish an essential counterbalance against statutory immunity. We shall debate that shortly, so I shall not go into it now, but I want to quote one sentence from the report of the Joint Committee on Financial Services, of which I was a member last year. It concluded, among other things:
We agree with those who see a robust complaints procedure as the central counterbalance to the FSA's statutory immunity.
It asked the Government to give serious consideration to the issue of financial awards.
I do not think that it is enough simply to refer to the possibility of ex gratia payments that are not mentioned in the Bill. That is not an assurance at all. I know that the Government do not want to allow the FSA to get into a legal tangle in regard to what might be compensation, and that that might have to be judged against some objective criterion. I think we should leave open exactly how awards are to be measured and made, but they must be referred to in the Bill. That is the thrust of the Joint Committee's conclusions, and it is the strong view of the Conservative Members who have spoken. We do not intend to press the other amendments, but we will press amendment No. 32.
Amendment agreed to.
Amendment proposed: No. 32, in page 198, line 36, at end insert—
";and
(iv) to recommend to the Authority the award of such sum as appears to him to be fair and reasonable in all the circumstances of the case in relation to any maladministration by the Authority.".—[Mr. Heathcoat-Amory.]
Question put, That the amendment be made:—

The House divided: Ayes 141, Noes 267.

Division No. 52]
[3.18 pm


AYES


Allan, Richard
Donaldson, Jeffrey


Amess, David
Dorrell, Rt Hon Stephen


Arbuthnot, Rt Hon James
Duncan, Alan


Baldry, Tony
Duncan Smith, Iain


Ballard, Jackie
Evans, Nigel


Beggs, Roy
Faber, David


Bercow, John
Fabricant, Michael


Beresford, Sir Paul
Fallon, Michael


Blunt, Crispin
Fearn, Ronnie


Bottomley, Rt Hon Mrs Virginia
Flight, Howard


Brady, Graham
Forth, Rt Hon Eric


Brake, Tom
Foster, Don (Bath)


Brazier, Julian
Fox, Dr Liam


Breed, Colin
Fraser, Christopher


Brooke, Rt Hon Peter
Gale, Roger


Browning, Mrs Angela
George, Andrew (St Ives)


Bruce, Ian (S Dorset)
Gibb, Nick


Burns, Simon
Gill, Christopher


Burstow, Paul
Gillen, Mrs Cheryl


Butterfill, John
Gorman, Mrs Teresa


Cable, Dr Vincent
Gray, James


Campbell, Rt Hon Menzies (NE Fife)
Greenway, John



Grieve, Dominic


Cash, William
Hague, Rt Hon William


Chope, Christopher
Hamilton, Rt Hon Sir Archie


Clark, Dr Michael (Rayleigh)
Hammond, Philip


Clifton-Brown, Geoffrey
Hayes, John


Collins, Tim
Heald, Oliver


Cotter, Brian
Heath, David (Somerton & Frome)


Curry, Rt Hon David
Heathcoat-Amory, Rt Hon David


Davies, Quentin (Grantham)
Hogg, Rt Hon Douglas


Day, Stephen
Horam, John






Howard, Rt Hon Michael
Portillo, Rt Hon Michael


Hunter, Andrew
Prior, David


Jack, Rt Hon Michael
Redwood, Rt Hon John


Jenkin, Bernard
Robathan, Andrew


Johnson Smith, Rt Hon Sir Geoffrey
Robertson, Laurence



Roe, Mrs Marion (Broxbourne)


Key, Robert
Rowe, Andrew (Faversham)


King, Rt Hon Tom (Bridgwater)
St Aubyn, Nick


Kirkbride, Miss Julie
Sanders, Adrian


Kirkwood, Archy
Sayeed, Jonathan


Laing, Mrs Eleanor
Shephard, Rt Hon Mrs Gillian


Lait, Mrs Jacqui
Shepherd, Richard


Lansley, Andrew
Smyth, Rev Martin (Belfast S)


Leigh, Edward
Soames, Nicholas


Letwin, Oliver
Spelman, Mrs Caroline


Lewis, Dr Julian (New Forest E)
Spring, Richard


Lidington, David
Stanley, Rt Hon Sir John


Lilley, Rt Hon Peter
Streeter, Gary


Lloyd, Rt Hon Sir Peter (Fareham)
Swayne, Desmond


Llwyd, Elfyn
Syms, Robert


Luff, Peter
Stunell, Andrew


Lyell, Rt Hon Sir Nicholas
Tapsell, Sir Peter


McIntosh, Miss Anne
Taylor, Ian (Esher & Walton)


MacKay Rt Hon Andrew
Taylor, John M (Solihull)


Maclean, Rt Hon David
Taylor, Sir Teddy



Tredinnick, David


Maclennan, Rt Hon Robert
Trend Michael


McLoughlin, Patrick
Tyrie, Andrew


Madel, Sir David
Viggers, Peter


Major, Rt Hon John
Walter, Robert


Maude, Rt Hon Francis
Waterson, Nigel


May, Mrs Theresa
Whitney, Sir Raymond


Moore, Michael
Whittingdale, John


Moss, Malcolm
Willetts, David


Nicholls, Patrick
Winterton, Mrs Ann (Congleton)


Norman, Archie
Winterton, Nicholas (Macclesfield)


O'Brien, Stephen (Eddisbury)
Yeo, Tim


Öpik, Lembit
Young, Rt Hon Sir George


Page, Richard



Pace, James
Tellers for the Ayes:


Paterson, Owen
Mr. Keith Simpson and


Pickles, Eric
Mr. John Randall.


NOES


Adams, Mrs Irene (Paisley N)
Butler, Mrs Christine


Ainger, Nick
Byers, Rt Hon Stephen


Ainsworth, Robert (Cov'try NE)
Caborn, Rt Hon Richard


Alexander, Douglas
Campbell, Alan (Tynemouth)


Allen, Graham
Campbell, Mrs Anne (C'bridge)


Anderson, Donald (Swansea E)
Campbell, Ronnie (Blyth V)


Anderson, Janet (Rossendale)
Campbell-Savours, Dale


Armstrong, Rt Hon Ms Hilary
Cann, Jamie


Ashton, Joe
Caplin, Ivor


Atkins, Charlotte
Casale, Roger


Austin, John
Cawsey, Ian


Banks, Tony
Chapman, Ben (Wirral S)


Barnes, Harry
Chaytor, David


Barron, Kevin
Clark, Dr Lynda (Edinburgh Pentlands)


Beard, Nigel



Beckett, Rt Hon Mrs Margaret
Clarke, Charles (Norwich S)


Bell, Martin (Tatton)
Clarke, Eric (Midlothian)


Bell, Stuart (Middlesbrough)
Clarke, Rt Hon Tom (Coatbridge)


Benn, Hilary (Leeds C)
Clelland, David


Benn, Rt Hon Tony (Chesterfield)
Clwyd, Ann


Bennett, Andrew F
Coffey, Ms Ann


Benton, Joe
Cohen, Harry


Berry, Roger
Coleman, Iain


Blackman, Liz
Colman, Tony


Blears, Ms Hazel
Cook, Frank (Stockton N)


Blizzard, Bob
Corbett, Robin


Bradley, Keith (Withington)
Corbyn, Jeremy


Bradley, Peter (The Wrekin)
Cousins, Jim


Brinton, Mrs Helen
Cranston, Ross


Brown, Russell (Dumfries)
Cryer, John (Hornchurch)


Browne, Desmond
Curtis-Thomas, Mrs Claire


Burden, Richard
Davey, Valerie (Bristol W)





Davidson, Ian
King, Ms Oona (Bethnal Green)


Davies, Geraint (Croydon C)
Kumar, Dr Ashok


Dawson, Hilton
Ladyman, Dr Stephen


Dean, Mrs Janet
Laxton, Bob


Denham, John
Leslie, Christopher


Dismore, Andrew
Levitt, Tom


Dobbin, Jim
Lewis, Ivan (Bury S)


Donohoe, Brian H
Liddell, Rt Hon Mrs Helen


Doran, Frank
Linton, Martin


Dowd, Jim
Lloyd, Tony (Manchester C)


Drew, David
Lock, David


Eagle, Angela (Wallasey)
Love, Andrew


Eagle, Maria (L'pool Garston)
McAvoy, Thomas


Edwards, Huw
McCabe, Steve


Ellman, Mrs Louise
McCartney, Rt Hon Ian (Makerfield)


Ennis, Jeff



Field, Rt Hon Frank
McDonagh, Siobhain


Fisher, Mark
Macdonald, Calum


Fitzpatrick, Jim
McDonnell, John


Flint, Caroline
McGuire, Mrs Anne


Follett, Barbara
McIsaac, Shona


Foster, Rt Hon Derek
McKenna, Mrs Rosemary


Foster, Michael Jabez (Hastings)
Mackinlay, Andrew


Foster, Michael J (Worcester)
McNulty, Tony


Gapes, Mike
MacShane, Denis


Gardiner, Barry
Mactaggart, Fiona


Gerrard, Neil
McWalter, Tony


Gibson, Dr Ian
McWilliam, John


Godsiff, Roger
Marsden, Gordon (Blackpool S)


Goggins, Paul
Marsden, Paul (Shrewsbury)


Gordon, Mrs Eileen
Marshall, David (Shettleston)


Griffiths, Jane (Reading E)
Marshall, Jim (Leicester S)


Griffiths, Win (Bridgend)
Martlew, Eric


Grocott, Bruce
Maxton, John


Hall, Mike (Weaver Vale)
Meale, Alan


Hall, Patrick (Bedford)
Merron, Gillian


Harman, Rt Hon Ms Harriet
Michie, Bill (Shef'ld Heeley)


Heal, Mrs Sylvia
Miller, Andrew


Healey, John
Mitchell, Austin


Henderson, Ivan (Harwich)
Moran, Ms Margaret


Hepburn, Stephen
Mountford, Kali


Heppell, John
Mowlam, Rt Hon Marjorie


Hewitt, Ms Patricia
Mudie, George


Hill, Keith
Mullin, Chris


Hodge, Ms Margaret
Murphy, Denis (Wansbeck)


Hope, Phil
Murphy, Jim (Eastwood)


Hopkins, Kelvin
Murphy, Rt Hon Paul (Torfaen)


Hoyle, Lindsay
Naysmith, Dr Doug


Hughes, Kevin (Doncaster N)
Norris, Dan


Humble, Mrs Joan
O'Brien, Mike (N Warks)


Hurst, Alan
Olner, Bill


Hutton, John
O'Neill, Martin


Iddon, Dr Brian
Organ, Mrs Diana


Illsley, Eric
Pearson, Ian


Ingram, Rt Hon Adam
Pendry, Tom


Jackson, Helen (Hillsborough)
Perham, Ms Linda


Jamieson, David
Pickthall, Colin


Jenkins, Brian
Pike, Peter L


Johnson, Alan (Hull W & Hessle)
Plaskitt, James


Johnson, Miss Melanie (Welwyn Hatfield)
Pollard, Kerry



Pond, Chris


Jones, Helen (Warrington N)
Pound, Stephen


Jones, Ms Jenny (Wolverh'ton SW)
Prentice, Ms Bridget (Lewisham E)



Prentice, Gordon (Pendle)


Jones, Jon Owen (Cardiff C)
Prosser, Gwyn


Jones, Dr Lynne (Selly Oak)
Purchase, Ken


Jones, Martyn (Clwyd S)
Quin, Rt Hon Ms Joyce


Jowell, Rt Hon Ms Tessa
Quinn, Lawrie


Keeble, Ms Sally
Reed, Andrew (Loughborough)


Keen, Alan (Feltham & Heston)
Reid, Rt Hon Dr John (Hamilton N)


Kelly, Ms Ruth
Roche, Mrs Barbara


Kemp, Fraser
Rooker, Rt Hon Jeff


Kennedy, Jane (Wavertree)
Roy, Frank


Khabra, Piara S
Ruddock, Joan


Kilfoyle, Peter
Russell, Ms Christine (Chester)


King, Andy (Rugby & Kenilworth)
Ryan, Ms Joan






Salter, Martin
Tipping, Paddy


Sarwar, Mohammad
Todd, Mark


Savidge, Malcolm
Touhig, Don


Sawford, Phil
Trickett, Jon


Sedgemore, Brian
Truswell, Paul


Shaw, Jonathan
Turner, Dennis (Wolverh'ton SE)


Sheerman, Barry
Turner, Dr Desmond (Kemptown)


Sheldon, Rt Hon Robert
Turner, Neil (Wigan)


Shipley, Ms Debra
Twigg, Derek (Halton)


Simpson, Alan (Nottingham S)
Tynan, Bill


Singh, Marsha
Walley, Ms Joan


Skinner, Dennis
Ward, Ms Claire


Smith, Rt Hon Andrew (Oxford E)
White, Brian


Smith, Angela (Basildon)
Wicks, Malcolm


Smith, John (Glamorgan)
Williams, Rt Hon Alan (Swansea W)


Smith, Llew (Blaenau Gwent)



Snape, Peter
Williams, Mrs Betty (Conwy)


Soley, Clive
Wilson, Brian


Southworth, Ms Helen
Winnick, David


Starkey, Dr Phyllis
Winterton, Ms Rosie (Doncaster C)


Steinberg, Gerry
Wise, Audrey


Stewart, David (Inverness E)
Wood, Mike


Stinchcombe, Paul
Woolas, Phil


Stoate, Dr Howard
Worthington, Tony


Strang, Rt Hon Dr Gavin
Wray, James


Stuart, Ms Gisela
Wright Dr Tony (Cannock)


Sutcliffe, Gerry



Temple-Morris, Peter
Tellers for the Noes:


Thomas, Gareth R (Harrow W)
Mr. Clive Betts and


Timms, Stephen
Mr. Greg Pope.

Question accordingly negatived.
3.30 pm
Amendments made: No. 437, in page 198, line 41, leave out "sub-paragraph (2)" and insert "the complaints scheme".
No. 438, in page 198, line 42, leave out "arrangements" and insert "complaints scheme".
No. 439, in page 198, line 48, leave out from beginning to second "the".
No. 440, in page 198, line 49, leave out "it" and insert "the Authority".
No. 441, in page 199, line 33, leave out "for an injunction" and insert "under sub-paragraph (5)".—[Miss Melanie Johnson.]

Mr. Heathcoat-Amory: I beg to move amendment No. 33, in page 201, line 39, after "faith" insert "or due to recklessness".
The amendment relates to the extremely contentious issue of statutory immunity. All hon. Members should be alert to any proposal to exempt any outside body from the force of law. For that reason, we have paid special attention to schedule 1. Part IV of the schedule will exempt the authority—both the corporate body and anyone who works for it—from legal action, except in certain narrowly defined circumstances.
The matter needs careful scrutiny. It is objectionable in principle for any body or person to elevate themselves above the law. It is ironic that the Bill extends the law—indeed, it creates new law—bringing people within its ambit, in many cases for the first time, while the FSA is retreating behind the wall of statutory immunity.
The Government must explain why the FSA is taking that degree of immunity, when the trend of political development over recent years has been to remove

statutory immunity. I remember a time when Crown immunity meant that if health and safety provisions were being ignored—in hospitals, for example—the law offered complete immunity from any legal action. Since that time, much has happened to bring public bodies within the law, making them accountable; for example, neither the police nor the Serious Fraud Office are statutorily immune.
However, the FSA, which has an incredible concentration of executive and law-making power, will be statutorily immune, except where it is acting in bad faith. The authority can be subject to judicial review, but the possibility of that has been considerably tightened by the wording of the Bill. Some hon. Members will discuss that matter at greater length.
The question is whether it might be wise slightly to loosen the statutory immunity, at least so as to ensure that it cannot be claimed if the authority acts recklessly.

Mr. Cousins: The amendment would insert the concept of recklessness. Will the right hon. Gentleman define recklessness? If the amendment is accepted, his definition of recklessness could have a considerable effect on how that concept is interpreted.

Mr. Heathcoat-Amory: The interpretation of all these matters is for the courts. However, the concept of recklessness is well known in the legal system. I do not know whether the hon. Gentleman has a driving licence, but I hope that he has never been accused of reckless driving. If he has, he will know that the penalties are severe.
The concept of recklessness—a good old English word—should not create any difficulties, especially as the Bill already includes concepts such as acting in bad faith or negligence. Those mean slightly different things, but they are not new departures within the legal system.
If the hon. Gentleman wants to develop his argument against recklessness, I shall listen to it with interest. We discussed the matter in Committee and encountered no problems with the concept of recklessness—only with the Government's belief that the FSA should be immune in respect of reckless behaviour.
That part of the law runs up against the European convention on human rights. Several cases of negligence in which attempts were made to claim immunity did not succeed; and some court cases brought under the convention resulted in the public bodies—the police, in one case—being made liable for negligent behaviour.
However, we shall not touch on those matters. Our aim is more modest: to net the FSA within the ambit of the law, if it acts recklessly. That is a reasonable proposition. There is a certain symmetry in the Bill. A market participant—a registered firm or an individual—would certainly be found guilty, and could be fined, if it acted recklessly or negligently. An oversight by a firm or an individual will, in some circumstances, render that body or person liable to a fine, or to the disciplinary processes outlined elsewhere in the Bill.
Intent does not necessarily have to be proved. An oversight—reckless or not—could land the regulated person on the wrong end of a fine. However, that does not apply to the FSA. As matters stand, it can act negligently or recklessly and no one can take legal action


against it. If the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) finds that fair or reasonable, we shall be interested to hear his speech.
Earlier, we discussed compensation—or the financial penalty that could be levied on the FSA, or paid to the firm or individual concerned. However, the Government have turned that down in favour of the much looser concept of ex gratia payments, which are not covered in the Bill. Last year, in the Joint Committee—

Liz Blackman: Will the right hon. Gentleman tell us to which financial regulator the concept of recklessness applies?

Mr. Heathcoat-Amory: The Financial Services Authority is the regulator to which the provision will apply. I am not interested in other regulators, but if the hon. Lady will enlighten me, I am sure we shall have another Bill to cover them.

Liz Blackman: Which other financial regulator, financial or otherwise, has incorporated the concept of recklessness as a test whereby an authorised person can sue that body? Is the right hon. Gentleman seeking to incorporate an entirely new concept in the FSA test?

Mr. Heathcoat-Amory: I have just explained that the concept of recklessness is not a novel proposition for British courts.

Mr. Oliver Heald: My right hon. Friend made the point that the concept of recklessness is not surprising in the context of the Bill. Clause 352 makes it clear that it is an offence recklessly to make a statement in certain circumstances. That concept is already in the Bill and obviously has a meaning.

Mr. Heathcoat-Amory: My hon. Friend makes an extremely helpful intervention which reinforces my point that recklessness can incur penalties when the public are guilty but not for the FSA when it behaves recklessly. That is precisely what I mean by the asymmetry in the Bill, which the amendment seeks to correct.

Mr. Cousins: I invite the right hon. Gentleman to comment on the fact that the amendment applies the concept of recklessness not only to the authority but to the investigator.

Mr. Heathcoat-Amory: Exactly the same should apply. It is a modest request to make that if people in authority behave recklessly in the course of their duties, a penalty should apply. In the case of the FSA, that would be done through the investigator. In the case of the investigator behaving recklessly, the penalty would be imposed through legal action.
I find it objectionable that firms can have their reputations ruined even if an investigation is launched but does not reach the point of a fine being levied. Even if it is shown that the FSA was reckless in launching such an investigation and destroying the livelihoods of the people concerned, there is no redress at law. If the independent investigator reaches the same conclusion, the FSA cannot be made to pay any financial compensation—which we seek to correct. The Joint Committee took the same view last year, when it made it clear that statutory immunity in

the form proposed would only be tolerable if a number of changes were made to the complaints and investigation system. Those changes, which are set out on page 40 of the Joint Committee's first report, have not all been accepted and enacted by the Government.
It therefore becomes even more important to restrict statutory immunity. I am not seeking to remove it entirely. Where the FSA makes a difficult judgment after looking at all the evidence and reaches a reasonable conclusion, it should not be open to legal challenge. Nevertheless, it should not have immunity when it acts recklessly. Removing statutory immunity entirely could inhibit the FSA from taking necessary action, but some erosion of the degree of statutory immunity in the Bill is important.

Sir Nicholas Lyell: I follow my right hon. Friend in commending the amendment to add recklessness to the concept of bad faith, which would render the authority liable to civil action and damages. It is only a small step from bad faith to recklessness. In some common law definitions, an element of bad faith is one of the ingredients of recklessness. That was so in the leading case of Derry v. Peek, but bad faith is not a necessary element of recklessness.
The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) asked for the meaning of "recklessness". In civil cases over the past 30 years it has meant the following. In 1961, it meant, with gross carelessness, or unacceptable indifference to the situation of the purchaser—here one might say, of the person being regulated. In the Trades Descriptions Acts, a reckless statement is a statement made without regard for its truth or falsity. In that case, it is made recklessly whether or not there is any dishonest intention. Sometimes there has to be dishonest intention, sometimes not.
If there were dishonest intention, the authority or investigator would be caught. One hopes that dishonesty would be exceptionally rare. In cases where there was no dishonest intention but something was done without regard to the truth or falsity of the basis on which it was done, or with unacceptable indifference to the situation of the person being regulated, it is right that the authority should be answerable.

Mr. Cousins: Given comments by Opposition Front Benchers and the right hon. and learned Gentleman's own references to the possible meanings of "recklessness", if the bundle of concepts being advanced—from driving licences and trade descriptions to legal decisions in a number of discrete cases—were imported to the meaning of recklessness in the Bill, would that not seriously undermine the rightful level of immunity to which the right hon. and learned Gentleman referred in the previous debate as something he wants to respect, and is that not something from which he wants to protect the FSA?

Sir Nicholas Lyell: No. We are struggling to strike the right balance and I am sure the hon. Gentleman is anxious to achieve that balance. I am confident that rarely would the FSA successfully be attacked on the ground of recklessness. There is a benefit in having the FSA under an obligation to look over its shoulder at least to that extent.
Any large organisation is likely from time to time to be negligent. It is human nature to be negligent. To place such a burden on the FSA would be to go too far.


The Association of Private Client Investment Managers suggests that the authority should be liable in respect of negligence. Although I respect many of the association's submissions, it goes too far in that. I feel sure that the FSA will supervise those working on its behalf sufficiently well to make the occasions on which it acts with gross carelessness rare. It will not be an undue burden on the FSA or its finances if occasionally it has to pay compensation.

Liz Blackman: Does the right hon. and learned Gentleman accept that under his vague and multiple definition, it is likely that the FSA would be challenged by large firms with lots of money, which could tie up the authority in court for many years and restrict proper regulation?

Sir Nicholas Lyell: No, I do not accept that. I recognise the danger that, occasionally, large firms might seek to tie up the authority, but restricting the liability of the authority to bad faith or recklessness provides adequate protection. It is a question of judgment, but I think that it is adequately protected. The authority will wish to be astute and, at least, not reckless. It will try hard not be negligent, and it ought to try hard. Members on both sides of the House think it right to make the authority immune from charges of negligence, but the likelihood of a case being successful on grounds of recklessness is much smaller, and the circumstances in which cases are successful are much less justifiable from the point of view of the authority. To draw the line there would seem to be reasonable.
As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) pointed out, other large bodies of a prosecutorial or regulatory nature are not given this type of immunity. I do not know to what extent all regulatory bodies have absolute immunity under existing law—it would be helpful to know. We are seeking to reconsider where the line ought to be drawn, and I believe that making the authority liable for recklessness is sensible, and part of that package.
I shall be comforted if the Government accept that the investigator will be able to award compensation, either directly or in a way that will effectively shame the authority into granting it—even though there is an element of ex gratia discretion there. That is one place at which the line should be drawn. Here, we are asking whether the line should not be drawn a little more in favour of the industry and a little less in favour of this immensely powerful authority.
I believe that the authority will be adequately protected if its liability is confined to bad faith and recklessness, and I commend the amendment to the House.

Miss Melanie Johnson: This subject has aroused considerable interest and was considered in detail by the Joint Committee, which broadly approved the immunity proposed by the Bill, subject to certain proposals to strengthen the complaints arrangements. We have followed those where appropriate. It is essential that we have a structure that allows the FSA to get on with its work efficiently and effectively, and the House recognises that that is important. A strong and accountable regulator must be in the interests of the industry and consumers alike.
Immunity is vital for delivering that aim. Without it, the FSA could be frustrated by potential law suits and red tape. It would be very easy to have frivolous litigation or to distract or hinder the regulator from carrying out its duties, which could have a detrimental impact on firms as well. The absence of immunity could make the FSA more risk averse and engender a more formalistic regulatory environment. I am grateful to the House for supporting the notion of immunity in that context.
There has been much discussion about the nature of recklessness and the contribution that the amendment would make to the Bill were it to be accepted. I have to say that I oppose the amendment. We want the FSA to be a dynamic regulator, and that might mean taking some difficult or finely balanced decisions in cases where the answers are not black or white. The authority should not have to run the risk of being sued as well.

Sir Nicholas Lyell: I entirely agree with the hon. Lady's last sentence, but she must recognise that finely balanced decisions are a million miles from recklessness. We are discussing, to use the language of the courts, decisions reached with gross carelessness or with unacceptable indifference to the situation of the person affected. That is very different from a finely balanced decision.

Miss Johnson: Like some of my hon. Friends, I am not sure what recklessness means in this context. It is a term with different shades of meaning in different contexts, and is primarily a concept in criminal law. The right hon. Member for Wells (Mr. Heathcoat-Amory) mentioned reckless driving, and recklessness does enter into driving matters. However, my recollection—from being on the bench as a magistrate—is that most charges relate to driving without due care and attention and driving dangerously, and do not feature the notion of recklessness.

Mr. Tyrie: Will the hon. Lady give way?

Miss Johnson: The hon. Gentleman has only just come back into the Chamber, so I am not going to give way. Had he wanted to participate in the debate on the amendment, he would have been here at the start.

Mr. Heald: The Bill contains within it the concept of recklessness, as clause 352 proposes to make it an offence for an individual recklessly to make a statement. Is not the main concern that a big important body such as the FSA will act in a high-handed way? In other words, it will recognise that there is a risk of damage to an individual but will go ahead anyway. That is the essence of recklessness. Why should there be immunity for acting in that way—the very thing we do not want the authority to do?

Miss Johnson: The circumstances in which this matter could arise, were we to accept the amendment, may involve occasions when financial regulators and the FSA might have to make rapid decisions or decisions that could involve a difficult question of judgment which could have serious consequences for firms and for the wider regulatory environment. They must be able to do that without fear of being sued, either by a firm or by that firm's customers. I am sure that the House accepts


that the interests of the FSA and of others who may wish to pursue the authority through the courts will not always coincide.
The right hon. Member for Wells asked why the police did not have immunity for negligence. However, I have given the reasons why immunity from suit is important and I am not convinced that cutting back immunity, as the amendment suggests, is right. The police do not have immunity from damages claims for negligence. If we make a comparison with other countries and financial regulators overseas, we see that they have similar immunity to that proposed by the Bill. I am grateful to my hon. Friend the Member for Erewash (Liz Blackman) for her remarks on that point.

Sir Nicholas Lyell: Am I not right in thinking that, in France, the regulator is liable for what is known as faute lourde? Is not faute lourde very similar to recklessness?

Miss Johnson: I am grateful to the right hon. and learned Gentleman for his considerable knowledge of legal systems around the world, and I agree that comparisons are difficult to draw in all cases. However, in the United States, the Securities and Exchange Commission is immune from suit for anything done in carrying out its functions or duties—regardless of whether the actions are in good or bad faith—so long as it does not violate a clearly established constitutional right. That would be established by a court ruling. Probably the strongest comparison—France is not the strongest comparison—is with Commonwealth countries such as Canada and Australia, where the immunities are similar to that proposed in the Bill.
Were the amendment to be accepted, it would potentially restrict the ability of the FSA to go about its business in the way that we want it to. Indeed, the present provision is similar to that provided for in the Financial Services Act 1986 and the Banking Act 1987, and the previous Government were instrumental in introducing the provisions for immunity in those Acts. That immunity was also supported by the late Lord Denning.

4 pm

Mr. Quentin Davies: It sounds as though the Economic Secretary is about to complete her summary of the amendment. However, not only has she failed to deal with the issue of faute lourde, the French analogy to which my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) referred: she has not provided any rationale justifying the distinction between the Government's approach to the liability of the police and their approach to the liability of the FSA. What is the rationale for the distinction? The whole purpose of Report is to go through the Government's proposals and to learn their rationale for departing from existing practice in this country. Will she answer our concrete, precise question?

Miss Johnson: I said clearly that I thought that comparisons with the French system did not hold water—there are too many differences. I thought that I had adequately covered the point about the police. I am sorry that the hon. Gentleman does not think that I did, but the police are in a very different position from the FSA for so many reasons that it is not difficult to imagine them.
I shall wind up my remarks—the hon. Gentleman has almost invited me to do so—by pointing out that core principle 1 of the Basle principles on banking regulators recognises the need for the immunity of banking supervisors. We fully support that principle. We would weaken the FSA's ability to deal effectively and quickly with difficult and finely balanced decisions if we accepted the amendment.

Mr. Flight: There is a huge body of law on the definition of recklessness. It is pointless our seeking to define it—we are not lawyers. However, to pretend that recklessness is not a clear legal concept is not right. As was pointed out, the concept occurs elsewhere in the Bill. In addition to the example given, it appears in clause 149, which deals with offences. Subsection (4)(b) refers to one who,
recklessly provides information which is false or misleading in a material particular".
The French concept of faute lourde means literally "heavy failing". Translated lawyer to lawyer, that means virtually the same as "reckless". As the Economic Secretary said, the United States Securities and Exchange Commission system is different, but it is by no means impossible to sue the SEC under the US constitution. That is a different approach to the one that we are discussing, but, as any US lawyer will say, the idea that the SEC enjoys immunity is false. There is a particular US approach to the issue.

Sir Nicholas Lyell: Does my hon. Friend agree that if the Government do not give some ground, they are likely to fall foul of articles 6 and 7 and article 1 of protocol 1 of the European convention on human rights?

Mr. Flight: I thank my right hon. and learned Friend. He is a lawyer, and that point has been made to me by other lawyers. The Government's hands will, in due course, be forced when an appropriate case is taken to the European Court.
As was made clear in the previous debate, the position of the Burns committee is perfectly sensible. Either the exemption from immunity should be limited or there should be a full and proper system of complaint, award and recompense. The Government are resisting on both counts, and the one on which they should concede ultimately is debatable. However, a decision will be forced on the Government in due course.
We shall not press the amendment to a vote because we made a point in the previous debate. The Law Lords are legally well qualified to sort out the issue in the other place and to insist on the point made by my right hon. and learned Friend. Although the issue will have to be resolved by one of the two routes that we have proposed, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

New Clause 8

LEGAL ASSISTANCE SCHEME

.—(1) The Lord Chancellor may by regulations establish a scheme governing the provision of legal assistance in connection with proceedings before the Tribunal.


(2) If the Lord Chancellor establishes a scheme under subsection (1), it must provide that a person is eligible for assistance only if—

(a) he falls within subsection (3); and
(b) he fulfils such other criteria (if any) as may be prescribed as a result of section (Provisions of the legal assistance scheme)(1)(d).

(3) A person falls within this subsection if he is an individual who has referred a matter to the Tribunal under section 101(4).
(4) In this Part of this Act "the legal assistance scheme" means any scheme in force under subsection (1).".—[Mr. Timms.]
Brought up, and read the First time.

The Financial Secretary to the Treasury (Mr. Stephen Timms): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Michael Lord): With this it will be convenient to discuss the following:
Government new clause 9—Provisions of the legal assistance scheme.
Government new clause 10—Funding of the legal assistance scheme.
Government new clause 11—Tax treatment of levies and repayments.
Government amendments Nos. 135, 182 and 183.

Mr. Timms: The purpose of new clauses 8, 9 and 10 is to provide the Lord Chancellor with the power to establish a subsidised legal assistance scheme in cases before the tribunal that involve the imposition of penalties for market abuse. They fulfil a commitment that my hon. Friend the Economic Secretary made to the Standing Committee on 2 November 1999 and will be widely welcomed.
In the light of consultation responses and evidence given to the Joint Committee chaired by Lord Burns, the Government reviewed the question of whether the market abuse regime should be categorised as criminal or civil for the purposes of article 6 of the European convention on human rights. We think that there are good arguments for characterising the regime as civil. Nevertheless, as a precautionary measure, we decided to introduce the convention's criminal protections for market abuse penalties. They include the provision of subsidised legal assistance where a person has insufficient means and where the interests of justice so require it.
New clause 8 will give the Lord Chancellor power to establish the scheme by regulations and that will result in a free-standing scheme for legal assistance rather than an extension to the existing legal aid scheme. It also sets out the coverage of the scheme. Assistance is to be provided to individuals who have referred to the tribunal a decision of the FSA to impose a penalty for market abuse. That reflects the category of cases where we think the convention might require assistance to be provided.

Mr. John Bercow: New clause 8 may be entirely unobjectionable and could even be productive, but I am always anxious when reference is made, especially by this Government, to things being done by regulations. Will the Minister assure me that, when the draft regulations are issued, there will be an adequate

period for consultation upon them before they are finalised and those associated with them have to come to terms with them?

Mr. Timms: I am grateful to the hon. Gentleman for what I thought was his welcome for the arrangements in the new clause. The Lord Chancellor will establish the scheme by regulations and I have no doubt that he will go through the normal procedures and provide adequate time for the discussion that the hon. Gentleman is quite right to say should take place.
My hon. Friend the Economic Secretary told the Standing Committee that it was not our intention to make legal assistance available for tribunal cases across the board. Legal assistance is not generally available in tribunal proceedings, which are intended to be speedier and less formal than court proceedings.
The Lord Chancellor's Department is currently considering the eligibility criteria; it is likely that the current conditions for legal aid in criminal cases will broadly be followed. If the criminal regime is adopted as a model, there will be two tests: first, an interests of justice test and, secondly, a means test.
New clause 9 gives further examples of the sorts of matter that will have to be covered by the Lord Chancellor's regulations. For example, we envisage the scheme being administered by the Court Service, which will run the tribunal. Therefore, subsection (1) of the new clause allows the regulations to specify who is to determine applications for legal assistance. Other detailed matters will have to be set out in the regulations and it will be necessary for the Lord Chancellor's Department to specify the form that legal assistance may take.
The funding of the scheme is dealt with in more detail in new clause 10. My hon. Friend the Economic Secretary told the Standing Committee that the scheme would be paid for by levies raised by the FSA from authorised persons. That is the effect of subsections (1) to (4). The Lord Chancellor will determine the cost of the legal assistance scheme and set the total amounts of the levy for a specified period—normally one financial year—required to be paid for by the levies; the FSA will decide on the distribution of levies on authorised persons.
Because the levy will be raised through FSA rules, the distribution of the levy among different groups of authorised persons will be a matter on which the FSA will be required to consult in the usual way under clause 127. The Government have tabled separately several amendments in that respect.
The cost of administering the scheme will come out of the running costs of the tribunal. In subsection (1), we have provided that the levy may cover anticipated or actual costs. The forecast of costs might prove to be an overestimate or an underestimate, so the arrangement we have made allows such matters to be sorted out at the end of the appropriate period.
New clause 11 deals with the treatment for tax purposes of levies payable to the compensation scheme, the ombudsman scheme and the legal assistance scheme, all of which are to be set up in accordance with the Bill. It specifies that payments from those schemes to relevant firms are to be treated as trading receipts. That is achieved by inserting into the Income and Corporation Taxes Act 1988 the provisions set out in new clause 11.
We have had to make that change because the current provision, clause 198, deals only with the tax treatment of payments to and from the compensation scheme. It does not cover the ombudsman scheme or the legal assistance scheme. Amendment No. 135 would remove clause 198, which is replaced by new clause 11, which covers all three schemes. Amendment No. 182 makes some consequential amendments to the Income and Corporation Taxes Act 1988. Amendment No. 183 repeals provisions in that Act and the Finance Act 1991. As the hon. Member for Buckingham (Mr. Bercow) said, it is likely that the series of changes we are making will be welcomed.

Mr. Flight: We were advised of the new territories with which the new clauses deal, but we received details of the new clauses only recently. While we broadly support the intention behind the new clauses, they contain some deficiencies.
Legal assistance is to be given only if the accused person has already gone through the FSA warning notice procedures and made representations. A person who carries out that process is likely to incur major legal expenditure. The Government have, in effect, accepted the probability that market abuse cases will be viewed as criminal under the European convention on human rights, but it strikes us that the scheme does not provide adequate legal aid for the whole process.
4.15 pm
Also at issue is the fairness of the rather convoluted funding arrangements. Market abuse is an offence that can be committed by anyone, even if not an authorised person, and by firms outside the United Kingdom. Therefore, it seems rather unfair that the legal assistance scheme should be funded entirely by authorised persons, and strange that the FSA can require payments to the scheme to be paid only by a particular class of authorised person.
We regard as unfair the FSA being able to make rules that excess receipts paid to it under the scheme should be distributed among only some of the authorised persons on whom the levy was imposed during the period in question. It is also unfair that sums can be applied to reduce amounts that those persons are, or will be, liable to pay to the FSA under the funding requirements "or otherwise". That wording appears to give the FSA the authority to apply excess receipts if a firm is liable to pay a fine—say, for market abuse or a disciplinary offence—but cannot afford to do so. Authorised persons will, in effect, have to pay the fines of defaulters. I doubt that that is what the Government intend.
New clause 11 is fine up to a point. However, an award of costs under costs rules can be deducted in the case of an investment company, but apparently not in the case of insurance companies. What is the reason for that difference? Will similar provisions apply, under normal taxation rules, in the case of all other classes of authorised person? The new clause appears to deal only with the tax position in respect of investment companies.
The big issue is clearly that of not providing legal assistance in respect of other offences. It is strange that the Government have accepted the risk on market abuse, but not on other matters in respect of which substantial fines can be imposed and individuals can lose

their livelihood. Proceedings involving matters other than market abuse will be regarded as criminal proceedings under the European convention on human rights.
The requirement in respect of legal assistance is spelled out expressly as a protection in cases of criminal charges, but it is also an aspect of the convention's requirement for a fair hearing. Therefore, legal assistance should be available, and not only because many cases other than those involving market abuse would be regarded as criminal proceedings under the convention.
As the Government are aware, many eminent lawyers are of that view. Lord Hobhouse, who is a Law Lord, Lord Lester, who is a senior QC, and others in their chambers have made clear their belief that the FSA's disciplinary powers as they stand are in breach of the European convention. Lord Burns stated:
Large fines imposed by the FSA could look punitive and that takes you into the world of criminal proceedings. In that case, it would be in breach of the ECHR.
Lord Poole, chief executive of the Lloyds group, Ockham Holdings, has made similar comments.
In our view, the Government are taking a considerable risk. When the Bill is enacted, it might be undermined completely by a case brought under the European convention on human rights. It would be wiser to address the issues up-front.
The other technical defects and issues that I have raised will no doubt be addressed, debated and corrected in the other place. Without sounding petty, it would have been useful if this territory had been addressed in Committee, where amendments could have been tabled before reaching this stage of the Bill's consideration.

Mr. Timms: I thought that the hon. Gentleman might be more welcoming of the changes that we have made, which arose from commitments made in Committee. I do not agree that we are taking a high-risk approach. Indeed, I think that we are taking a precautionary approach by ensuring that legal assistance will be available in instances where conceivably it could turn out to be required.
The hon. Gentleman asked me a number of questions, which I shall attempt to answer. First, he asked why authorised persons should be those who pay the levy and not others. Authorised persons stand to benefit most from the improved functioning of the market that will be brought about by the market abuse regime. They will be the beneficiaries of any penalties that the FSA imposes. We suggest, therefore, that it is right that authorised persons should be the ones who pay for the costs of legal assistance. I do not think that there is any reason for that burden to be shouldered by the general taxpayer, which I suppose would be the alternative.
The hon. Gentleman asked about what happens if there is a surplus. In that situation the Lord Chancellor might either repay the excess to the FSA or reduce the amount that it has to levy the following year. If the excess is repaid to the FSA, it might distribute the money among those on whom the levy was imposed, or it might be offset against future levies or fees that those persons have to pay. I think that that is a sensible way to manage matters.
The hon. Gentleman asked, "Why not go further and extend legal assistance elsewhere?" That was the central issue in his speech and he described it as the most important. I re-emphasise that the additional protections


against market abuse are in place as a precautionary measure. There is not a need to extend the scheme further. We are clear that the disciplinary regime is not a criminal regime for conventional purposes, so a wider scheme of legal assistance is not needed. That issue was addressed fully in the memorandum that went to the Joint Committee on 14 May and in the evidence given on that occasion by the then Economic Secretary, with Sir Sydney Kentridge QC and James Eadie. We have stated our position clearly and unambiguously, and that remains our view today.

Mr. Heathcoat-Amory: I am grateful for the Minister's response to the questions raised by my hon. Friend the Member for Arundel and South Downs (Mr. Flight). However, I am not entirely satisfied because I think the Government are running a big risk in not extending subsidised legal assistance to those accused of serious offences under the disciplinary regime. We welcome the fact that the Government are bringing forward this assistance for market abuse cases, which is important. However, they seem to be relying heavily on their assertion that the disciplinary regime will not be judged to involve matters of a criminal nature, so that the appropriate protection for those accused of criminal offences will not apply in such cases.
In reaching that conclusion, the Government have relied heavily on the fact that, potentially, market abuse offences can cover virtually the entire population. Anyone—even someone not regulated under the Bill—can be judged to be engaging in market abuse. As I understand it, however, disciplinary offences apply only to the regulated community. That gives the regime the character of disciplining a club; that is why a civil regime is appropriate. It is a large club, however. If anyone wants to earn their living in the financial services industry, they must register or, as it were, become a member of the club.
As a layman, I rather doubt whether courts will continue to take the view that all fines, however large, that are levied on the regulated community are of a civil nature. The fines can be extremely large, and I believe would imply a penalty or punishment. If that is the position, I believe that at some stage a court will judge a matter subject to the disciplinary regime to be of a criminal nature. If that is the case, other safeguards must apply under the European convention on human rights. For example, if those accused are unable to pay for professional defence, they must be subsidised. That is natural justice. If someone is to be prosecuted by a professional, he must be defended by a professional. If the individual cannot pay for one himself, there is the legal aid scheme. That is what it is for.
In setting up something akin to the legal aid scheme in the Bill, the Government are most unwise not to make provision to extend it.

Mr. Bercow: I have no means of knowing whether my right hon. Friend is right in his anxieties. Surely the logic of what he is saying, if he is correct, is that the Government lawyers are not giving value for money.

Mr. Heathcoat-Amory: I hesitate to criticise lawyers. We never know when we will need one. My hon. Friend makes a good point in that there is no doubt that the Bill

has evolved under the impact of external legal advice. When the Bill was published in July 1998, it was undoubtedly at variance with the requirements of the European convention. I do not know whether that was because of faulty legal advice in drawing up the Bill. Better-qualified legal advice, or advice provided by more specialised quarters, has persuaded the Government to amend the Bill to bring it more into line with the requirements of the convention. That is why the Government have radically amended the market abuse provisions to provide greater clarity and to provide other safeguards.
The Government have not, however, provided for safeguards in respect of subsidised legal advice and defence to be applied to the disciplinary regime as well. I feel that that leaves the Bill wide open. When the European convention becomes fully applicable in English law, which I think will happen later this year, it will be serious if a challenge succeeds.
There is a mechanism for the Government to bring forward in short order an amendment to change the legislation, but meanwhile any cases that are before the courts, or pending, must fail. It would be a serious matter for the City, and the financial services industry generally, to be without proper legal cover. In that respect, the regulatory system would have failed while the Government brought forward further and better clauses. The Government are running a risk not only with their reputation but with the stability of the market. That is why the matter is serious.
We did not debate the Ways and Means resolution. We allowed it to go through on the nod at the beginning of our proceedings in order to make progress. It is relevant to our discussion because the Government are to introduce a new tax on the regulated community through the resolution and the new clauses in the form of a levy. The money will go into the consolidated fund, and, somehow, come out again, when the Lord Chancellor will pay some of it back to the FSA, which may redistribute it back to the authorised firms and individuals if there is a surplus. That is an amazingly cumbersome system, and the Government have not explained why it is necessary.
4.30 pm
If the provisions are accepted, the House will delegate the power to tax to the FSA. We must be cautious about that because an authorised individual—for example, an independent financial adviser—will be subject to a levy. That money will be used not necessarily for legal help for that adviser if he is accused of market abuse, but for his clients—members of the public who will pay nothing. That will happen because the scheme is not funded through general taxation but through the levy. People and firms will have to pay a form of taxation into a fund, which will be used in unspecified ways.
We do not know the details of the scheme. It is another item that will be delegated to secondary legislation through our old friend the negative resolution procedure. This debate is our last opportunity to hear and agree the details, or at least to be told more about them. The way in which a legal aid scheme works, the sources of the funds, their application, and the criteria for eligibility for assistance are important matters of justice. The scheme will never come before the House because the order will be made under the negative resolution procedure.


If anyone objects, the Government can say, "That's very interesting, but we won't debate it," and the scheme will become law.
The Minister's comments have been light on substance. We knew that the scheme would be included on Report, but the details remain sketchy. As I said earlier, they involve the redistribution of money, compulsorily levied from people in the financial services industry. The Government owe us a slightly longer explanation.

Mr. Loughton: I am sorry that I was not present for the earlier discussions on the new clause—I was called away. I want to add a few comments to those of my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory).
As I said when we started the debate, the details of the legal aid scheme were not available to the Committee that considered the Bill. As my right hon. Friend said, although great chunks of new clauses are being added at a late stage, an enormous amount of detail about the workings of the scheme is simply unavailable. I am especially worried about new clause 10, which outlines a large part of the new scheme. It establishes a strange, cumbersome structure whereby the FSA will raise a levy from members to pay the Lord Chancellor the relevant sum, which will then go into the consolidated fund. The Lord Chancellor will then fund the cost of legal aid from money provided by Parliament. That necessitates an equalisation fund for the refund to the FSA, and a complicated redistribution to its members. By the time everyone has had a pound of flesh, and taken a cut for the administration of the scheme, one wonders whether any money will be left for the scheme, or to refund the people who paid in the first place.
There is a basic anomaly and injustice in the provision. It is unfair that authorised people alone will pay the levy for the misdemeanours of unauthorised people. There is also confusion about the period in which the Lord Chancellor decides how the equalisation repayments to the FSA and member firms will be made. Much can change in a year, and manipulation can occur.
New clause 10(7)(a)(ii) poses a question about the equality of the redistribution to authorised persons because it refers to:
such of those persons as it may determine".
On what will such a decision be based? Will it be based on someone having the head of the FSA round for a rather nice lunch and his then deciding that that person should get a slice of the cake for which they paid in the first place? That is iniquitous and leaves the provision open to challenge concerning the equality of the treatment of member firms that have to stump up money. The method of redistribution could be entirely arbitrary. We need far more details.
Decisions about refunds that are paid on account before the amounts are calculated also seem arbitrary. The excess receipts could be calculated against a firm's potential fines. Contrary to the rule that one is innocent until proven guilty, a firm is considered a potential member of the sin-bin pool before being identified as possibly having committed some misdemeanour that may be investigated

by the FSA. That turns the code of natural justice on its head and will be open to challenge under the convention on human rights.

Mr. Timms: Who, in the hon. Gentleman's opinion, should pay for the legal assistance scheme, if not the authorised persons?

Mr. Loughton: It is not my job to specify that. I have not objected to a levy for a legal aid scheme. I have not said whether I believe that the scheme is right or wrong. Throughout our proceedings in Committee, I did not say whether it was right or wrong in principle. I simply questioned how it would work. I do not say that we should not have such a scheme. It has great merit, and, if run properly, is probably fair. However, the scant proposals that we have been given do not provide for equality.
In the old days of the stock exchange, there was a mechanism called the PTM levy—I must be careful to get the initials in the right order. It stood for the panel of takeovers and mergers. A levy would be added to everyone's contract. That was considered a fair way of raising money for a group that operated in part of the City's structure. People did not object to it. Could the levy that new clause 10 proposes function in the same way? How will firms pay for it? Is there a mechanism to prevent firms that have to pay an indeterminate levy from adding a legal aid fund levy to contract charges for their clients? If that happened, the clients would pay, quite transparently, for the legal aid process. Is that permissible? It is an obvious way of proceeding. As with so much of the measure, the clients, who apparently need extra regulation, will end up paying for it. How does the Minister envisage companies funding payment of that levy, and could they issue a contract surcharge on their business, whatever sort of business, equity transactions or insurance business they carry on? Is the cost of the levy completely open ended? Will it be capped or could it double one year and treble the next? An awful lot of money could be involved, depending on the amount of legal activity that is to be financed. Smaller firms could have to find a considerable sum, which would affect their ability to carry on their business.
I wanted to raise those questions, but the fundamental point is that we still lack an awful lot of detail. It is all very well for the Minister to say, "What would you do?", but I am not criticising the basic structure or the basic approach that the Government appear to be adopting. I want to be convinced that the proposal will work properly and fairly and that its extent can be properly defined, but I fear that nothing I have heard suggests that I can be assured on any of those questions.

Mr. Timms: I am still listening eagerly for a welcome from Conservative Members for the changes that we have made in response to points raised with us. Their welcome still sounds rather grudging, although the hon. Member for East Worthing and Shoreham (Mr. Loughton) said that the arrangement could be fairly fair so perhaps we are making progress. He asked about the details, and the hon. Member for Buckingham (Mr. Bercow), who was present earlier, was absolutely right about them: it is important that there should be consultation. That is a matter for the Lord Chancellor, who will consult in due course.
I do not want to go back over old ground, but I shall respond to some of the points made by the right hon. Member for Wells (Mr. Heathcoat-Amory) and the hon.


Member for East Worthing and Shoreham. The arguments pushed in two conflicting directions: we were being urged to give the scheme a wider embrace and criticised for the way in which it will be paid for, but no alternative was suggested.
I think we have the balance right, but I want to address the serious charge that there is risk in what the Government are doing. I do not believe that that is the case. The right hon. Gentleman fairly and accurately described our position, which is that the disciplinary regime does not deal with criminal conduct, but suggested that we were treating it like club. The right analogy is with the regulation of professions, on which the jurisprudence is absolutely clear: such regimes are civil. That is the basis on which we are proceeding.
Question put and agreed to.
Clause read a Second time, and added to the Bill.

New Clause 9

PROVISIONS OF THE LEGAL ASSISTANCE SCHEME

".—(1) The legal assistance scheme may, in particular, make provision as to—

(a) the kinds of legal assistance that may be provided;
(b) the persons by whom legal assistance may be provided;
(c) the manner in which applications for legal assistance are to be made;
(d) the criteria on which eligibility for legal assistance is to be determined;
(e) the persons or bodies by whom applications are to be determined;
(f) appeals against refusals of applications;
(g) the revocation or variation of decisions;
(h) its administration and the enforcement of its provisions.

(2) Legal assistance under the legal assistance scheme may be provided subject to conditions or restrictions, including conditions as to the making of contributions by the person to whom it is provided.".—[Mr. Betts.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 10

FUNDING OF THE LEGAL ASSISTANCE SCHEME

".—(1) The Authority must pay to the Lord Chancellor such sums at such times as he may, from time to time, determine in respect of the anticipated or actual cost of legal assistance provided in connection with proceedings before the Tribunal under the legal assistance scheme.

(2) In order to enable it to pay any sum which it is obliged to pay under subsection (1), the Authority must make rules requiring the payment to it by authorised persons or any class of authorised person of specified amounts or amounts calculated in a specified way.

(3) Sums received by the Lord Chancellor under subsection (1) must be paid into the Consolidated Fund.

(4) The Lord Chancellor must, out of money provided by Parliament fund the cost of legal assistance provided in connection with proceedings before the Tribunal under the legal assistance scheme.

(5) Subsection (6) applies if, as respects a period determined by the Lord Chancellor, the amount paid to him under subsection (1) as respects that period exceeds the amount he has expended in that period under subsection (4).

(6) The Lord Chancellor must—

(a) repay, out of money provided by Parliament, the excess to the Authority; or
(b) take the excess into account on the next occasion on which he makes a determination under subsection (1).

(7) The Authority must make provision for any sum repaid to it under subsection (6)(a)—

(a) to be distributed among—

(i) the authorised persons on whom a levy was imposed in the period in question as a result of rules made under subsection (2); or
(ii) such of those persons as it may determine;


(b) to be applied in order to reduce any amounts which those persons, or such of them as it may determine, are or will be liable to pay to the Authority, whether under rules made under subsection (2) or otherwise; or
(c) to be partly so distributed and partly so applied.

(8) If the Authority considers that it is not practicable to deal with any part of a sum repaid to it under subsection (6)(a) in accordance with provision made by it as a result of subsection (7), it may, with the consent the Lord Chancellor, apply or dispose of that part of that sum in such manner as it considers appropriate.

(9) "Specified" means specified in the rules.".—[Mr. Betts.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 11

TAX TREATMENT OF LEVIES AND REPAYMENTS

".—(1) In the Income and Corporation Taxes Act 1988 ("the 1988 Act"), in section 76 (expenses of management: insurance companies), for subsections (7) and (7A) substitute—
(7) For the purposes of this section any sums paid by a company by way of a levy shall be treated as part of its expenses of management.
(7A) "Levy" means—

(a) a payment required under rules made under section (Funding of the legal assistance scheme)(2) of the Financial Services and Markets Act 2000 ("the Act of 2000");
(b) a levy imposed under the Financial Services Compensation Scheme;
(c) a payment required under rules made under section 209 of the Act of 2000;
(d) a payment required in accordance with the standard terms fixed under paragraph 18 of Schedule 14 to the Act of 2000."

(2) After section 76 of the 1988 Act insert—

Levies and repayments under the Financial Services and Markets Act 2000

76A.—(1) In computing the amount of the profits to be charged under Case I of Schedule D arising from a trade carried on by an authorised person (other than an investment company)—

(a) to the extent that it would not be deductible apart from this section, any sum expended by the authorised person in paying a levy may be deducted as an allowable expense;
(b) any payment which is made to the authorised person as a result of a repayment provision is to be treated as a trading receipt.

(2) "Levy" has the meaning given in section 76(7A).

(3) "Repayment provision" means any provision made by virtue of—

(a) section (Funding of the legal assistance scheme)(7) of the Financial Services and Markets Act 2000 ("the Act of 2000");
(b) section 188(1)(e) of the Act of 2000.

(4) "Authorised person" has the same meaning as in the Act of 2000.

Levies and repayments under the Financial Services and Markets Act 2000: investment companies

76B.—(1) For the purposes of section 75 any sums paid by an investment company—

(a) by way of a levy, or
(b) as a result of an award of costs under costs rules, shall be treated as part of its expenses of management.

(2) If a payment is made to an investment company as a result of a repayment provision, the company shall be charged to tax under Case VI of Schedule D on the amount of that payment.

(3) "Levy" has the meaning given in section 76(7A).

(4) "Costs rules" means—

(a) rules made under section 205 of the Financial Services and Markets Act 2000;
(b) provision relating to costs contained in the standard terms fixed under paragraph 18 of Schedule 14 to that Act.

(5) "Repayment provision" has the meaning given in section 76A(3)." ".—[Mr. Betts.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 27

REPORTS BY DIRECTOR GENERAL OF FAIR TRADING

".—(1) The Director must keep the regulating provisions and the Authority's practices under review.

(2) If at any time the Director considers that—

(a) a regulating provision or practice has a significant anti-competitive effect, or
(b) two or more regulating provisions or practices taken together, or a particular combination of regulating provisions and practices, have such an effect,

he must make a report to that effect.

(3) If at any time the Director considers that—

(a) a regulating provision or practice does not have any significant anti-competitive effect, or
(b) two or more regulating provisions or practices taken together, or a particular combination of regulating provisions and practices, do not have any such effect,

he may make a report to that effect.

(4) A report under subsection (2) must include details of the anti-competitive effect.

(5) If the Director makes a report under subsection (2) he must—

(a) send a copy of it to the Treasury, the Competition Commission and the Authority; and
(b) publish it in the way appearing to him to be best calculated to bring it to the attention of the public.

(6) If the Director makes a report under subsection (3)—

(a) he must send a copy of it to the Treasury, the Competition Commission and the Authority; and
(b) he may publish it.

(7) Before publishing a report under this section the Director must, so far as practicable, exclude any matter which relates to the private affairs of a particular individual the publication of which, in the opinion of the Director, would or might seriously and prejudicially affect his interests.

(8) Before publishing such a report the Director must, so far as practicable, exclude any matter which relates to the affairs of a particular body the publication of which, in the opinion of the Director, would or might seriously and prejudicially affect its interests.

(9) Subsections (7) and (8) do not apply in relation to copies of a report which the Director is required to send under subsection (5)(a) or (6)(a).

(10) For the purposes of the law of defamation, absolute privilege attaches to any report of the Director under this section.".—[Miss Melanie Johnson.]

Brought up, and read the First time.

Miss Melanie Johnson: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: Government new clause 28—Consideration by Competition Commission.
Government new clause 29—Role of the Treasury.
Government new clause 32—Misleading the Director General of Fair Trading.

Amendment No. 30, in clause 2, page 1, line 22, at end insert—
(bb) the maintenance of a vigorous and effective market in financial services;".

Amendment No. 192, in page 2, line 2, at end insert—
(e) the maintenance of competition and promotion of United Kingdom competitiveness.

Amendment No. 49, in page 2, line 3, leave out from "must" to end of line 18 and insert "seek to—

(a) use its resources in the most efficient and economic way;
(b) take into account the responsibilities of those who manage the affairs of authorised persons and ensure that it does not intrude unnecessarily into their management of the commercial affairs of such persons;
(c) impose burdens or restrictions on a person, or on the carrying on of an activity, only if they are proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction;
(d) facilitate, and not unnecessarily impede, innovation in connection with regulated activities;
(e) maintain the international competitiveness of the United Kingdom and authorised persons;
(f) impede or distort competition between authorised persons only to the extent that such impediment or distortion is necessary.".

Government amendments Nos. 240, 316 and 317.

Amendment No. 231, in clause 132, page 61, line 3, leave out—
may, if he thinks fit
and insert "shall'

Government amendment No. 447.

Amendment No. 232, in clause 133, page 61, line 23, after "information", insert "relevant to the investigation".

Government amendments Nos. 318 and 319.

Government new schedule 2.

Miss Johnson: These new clauses and amendments are part of the package of changes that we are making in response to Don Cruickshank's interim report on banking services, which helped us to identify a number of useful amendments that we could make to improve the FSA's internal processes in taking account of competition and to strengthen the external scrutiny arrangements. I set out what we intended to do in Standing Committee A on 9 November. We shall also table similar amendments to the analogous regime for recognised bodies and that proposed for the competent authority for listing. I could run through, at great length, how the process will work, but it might be helpful if I focus on particular aspects. If Conservative Members have queries that are not resolved, perhaps they will raise them.
I begin with the role of the Treasury in respect of new clause 29. The Competition Commission, when it has considered a report from the director general, will produce its own report, except where it feels that that is not necessary. If the commission concludes that there is no significant anti-competitive effect, that will be the end of the matter. If it concludes that there is significant anti-competitive effect and that is justified, it will state that in its report. Where the commission concludes that the anti-competitive effect is not justified, it will recommend changes to the FSA's regulating provisions or practices in its report.
The Competition Commission's conclusion will not be subject to routine second guessing by Ministers. It will stand, except where the Treasury considers that exceptional circumstances cause it to reach a different view. We can envisage a Treasury override being triggered when it is necessary to meet our international obligations—for example, to give effect to European Community legislation—or when the Treasury thinks that there would be significant implications for the operation of the financial system as a whole if the changes were to be made. In the unlikely event of its exercising that override, the Treasury will have to publish a statement of its reasons and lay that before Parliament.

Mr. Tyrie: Those remarks are close to those the Minister made in Committee when we did not have time to absorb them, although we have subsequently done so. New clause 29(3)(a) says that the Treasury may set a direction aside if it considers it
unnecessary for them to give a direction
as a result of action taken by the authority. Can she explain the purpose of new clause 29? No reference was made to it in Committee.

Miss Johnson: I am looking for the new clause in my amendment paper; perhaps I can return to that matter.
When the commission finds that an anti-competitive effect is not justified and there are no grounds for an override, the Treasury will do whatever it thinks necessary in the light of the Competition Commission report.

In taking action, the Treasury must have regard to the Competition Commission's opinion when deciding what to direct the FSA to do. The Treasury must also have regard to the views of the FSA and other interested persons when considering whether to give a direction.
Those new arrangements will ensure that, other than in exceptional circumstances, it will be the Competition Commission, not Ministers, who will come to the decisive view on whether anti-competitive effects are justified.

Sir Nicholas Lyell: Can the Minister clarify what seems to be a fundamental question? When we talk about competition and anti-competitive effects, are we talking about the competitiveness of the United Kingdom financial services market as against the French, New York or Frankfurt markets, or are we talking about distortions of competition within the UK market?

Miss Johnson: Basically, we are talking about distortions of competition within the UK market. I shall come to the issue of international competitiveness, which the right hon. and learned Gentleman raised earlier, when I reach Opposition and other amendments that relate more closely to that issue.
As I said, generally, it is not Ministers who will reach the decisive view on whether claims of anti-competitive effects are justified. Where exceptional circumstances cause Ministers to override the Commission, the Bill provides for a high degree of transparency. Of course, we expect that the relevant Select Committee would wish to question Ministers in more detail about use of the override, but who in this House would wish to suggest that a Select Committee did anything in particular?
The other part of this package of amendments is a change to the competition principles in clause 2. These principles are at the heart of the processes that the FSA goes through when making regulatory provisions and otherwise discharging its general functions. If the processes work as they should, the external scrutiny arrangements should be academic.
Perhaps I can come on to the "have regard to" phrase in the chapeau to clause 2(3). We undertook in Committee to look at whether this is the right formulation and carries sufficient weight to ensure that the FSA takes full account of the principles in discharging its general functions. As I explained in Committee, the objectives and principles must be considered together. The objectives are about the aims and purpose of regulation. The principles are about the manner of regulation. They are, in effect, statements about good regulatory practice and act as constraints on over-regulation.
In determining how to discharge its general functions, the FSA will go through a single process in order to come up with the right result. It will consider the clause 2(1) objectives together with the clause 2(3) principles in discharging its general functions—that is, in making rules and guidance and in coming up with its general policies.
We have explored with the draftsmen whether the "have regard to" formula is the right one to describe what we want the FSA to do in respect of the principles in this process. We want something that requires the FSA to give proper weight to the principles and to ensure that it takes them properly into account but, at the same time, does not expose the regulators to tactical litigation on individual regulatory decisions. Exploration of these issues has led


us to the conclusion that the current formulation strikes the right balance and that it is clear that the FSA must give proper weight to the principles. To pay lip service to them will not be enough.
Clearly, however, it would be nonsense if the FSA were under an obligation to go through the objectives-principles balancing process every time it takes a decision on an individual case. As well as being pretty much an impossible task, it would open up the scope for judicial review of individual decisions. For example, the FSA could be challenged on whether it is right to engage in an advertising campaign to improve consumer awareness or whether it is employing too many people on the pensions review.
If there were a significant risk that the FSA would have to contest actions for review at every turn, it would be a serious impediment to good regulation. The Joint Committee agreed with this when it concluded that the objectives and principles should apply at the level of general policy and principles, rather than directly to every single act and decision of the FSA. Naturally, it is important that the FSA is accountable for its decisions. Judicial review of whether it is carrying out its legislative and general functions in accordance with the requirements of clause 2 will be possible.
Our carefully considered view is that the current formulation and structure is the right one. It will not be enough, as some have suggested, for the FSA to pay lip service to these principles. The FSA must give the best effect it can to them. That is the nature of the duty.
The "have regard to" formulation is not new. It applies in other legislation in similar contexts, for example, in the Coal Industry Act 1994 and the Civil Aviation Act 1982. It is fair to say that the statute book is peppered with requirements for people to "have regard to" X or Y when carrying out their duties, and have regard to these things they must. It is a strong requirement.
We also undertook to look again at the competition principle in clause 2(3)(f). We agree with Don Cruickshank that it is vital that competition concerns are given proper weight by the FSA. Amendment No. 240 introduces changes and does three things. First, it introduces a more positive principle as regards the adverse effects of competition. Rather than the principle being that the competition should not be impeded or distorted unnecessarily, it now makes it clear that the FSA must consider how to take active steps to minimise the adverse effects on competition.
Secondly, the amendment removes the reference to authorised persons. In exercising its general functions, the FSA can do things that impact on other groups. For example, it could make a rule requiring authorised persons to use the services of a particular software provider or telecommunications firm. Where things do impact on other groups, the FSA should take care to minimise the adverse effects on competition.
Thirdly, the amendment requires the FSA to have regard to the desirability of facilitating competition between those subject to regulation. That recognises that there are things that the FSA can do in regulating which are sensible for a financial services regulator to do and which will make it easier for firms to compete.
The new principle is designed to make the FSA think hard about what it can do to facilitate competition between those it regulates. It makes it clear that it will

have to address the question of how, through different ways of regulating, it could remove unnecessary barriers as well as not erecting them in the first place.
On amendment No. 30, there is no doubt about the importance to the economy of the financial services sector. I share the concern that it should continue to be vigorous and effective. I understand and fully agree with the aim, but the amendment is not the way to achieve it. It would not be appropriate to give the FSA such an objective.
Although the FSA is responsible for creating and maintaining a regulatory framework in which a vigorous and effective market can exist, it is up to the market itself, through competition and innovation, to maintain its vigour and effectiveness.
The FSA must not, of course, put up unnecessary barriers in the way of that, or rip down necessary barriers. Under-regulation and over-regulation both have adverse effects, but the regulatory objectives and principles that the Bill gives the FSA are aimed at ensuring that it arrives at the right level of regulation, which keeps costs down while maintaining the confidence of consumers and the integrity of the markets. That is what the FSA can do to help to maintain the vigour and effectiveness of the UK financial services industry. The rest is up to the industry itself.
On amendment No. 192, as I said in Standing Committee a number of times and as I am sure everyone accepts, competition and competitiveness are different. The amendment seeks to combine them. The bodies responsible for competition regulation in the UK are the Office of Fair Trading and the Competition Commission. Their responsibilities extend throughout the economy. It would be their responsibility to investigate and to deal with, for example, a suspected cartel of insurance companies in the same way as a suspected cartel of supermarkets.
The FSA is not a competition regulator, but is concerned with the prudential supervision of the financial services industry and the protection of consumers. If it had a competition objective, it would have to duplicate and, potentially, interfere with the job that is already done, and done well, by the OFT and the Competition Commission. That would be a recipe for total confusion.
That does not mean that the FSA has no interest in competition. It must always be aware of the danger that, in regulating, it might unnecessarily restrict competition. That is why we have provided in subsection (3) that it "must have regard to" that matter and why we have backed that up with the special competition scrutiny regime in part IX.

Mr. Tyrie: The hon. Lady says that competition and competitiveness are fundamentally different. In a sense, they are because competitiveness is concerned with overall economic performance, but could any action be taken to improve competition that would be deleterious to competitiveness?

Miss Johnson: I do not think the two things link in that simple way. I should like to come back to another point that the hon. Gentleman raised with me, but it does not fit very well here, so may I finish dealing with competitiveness?
Competitiveness is another area where primary responsibility does not lie with the FSA. Instead, the international competitive position of the UK financial services industry will be maintained by the same people who built it: financial service businesses.
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It is not clear what role the FSA will have to take on in promoting competitiveness, but if it entailed the FSA trying to pick winners among United Kingdom firms or telling them how to run their businesses, it would be more likely to do harm than good. However, I am not saying that the FSA has absolutely no interest in competitiveness. We realise that, as with competition, the way in which the FSA regulates can have an impact on competitiveness, and subsection 3(d) requires the FSA to have regard to that fact. However, as I said, such a requirement is very different from a competitiveness objective.
The hon. Member for Chichester (Mr. Tyrie) asked about the purpose of subsection 3(a) of new clause 29. The paragraph deals with situations in which, as a result of a Competition Commission report, the FSA decides to abandon the rule or practice that has been condemned. If the FSA acts to abide by the commission's conclusions, there is no need for the Treasury to give a direction. New clause 29(3)(a) allows for that position. It deals with situations in which action has been taken.
The Opposition have suggested, in amendment No. 49, a formulation to be inserted in the "seek to" formula. That formulation would require the FSA to take action to try to achieve the objectives in clause 2(3). I agree that that is what we want the FSA to do, and I am grateful to Opposition Members for confirming that that is also how they want the Bill to work. However, that is also the effect of the "have regard to" formula, and the "seek to" wording does not really work with the other provisions of clause 2. It makes no sense, for example, to talk about the FSA "seeking to impose burdens or restrictions on a person" or "seeking to impede or distort competition", regardless of the wording that follows.
The second change that the amendment would make is to require the FSA to seek to ensure that it does not intrude unnecessarily in the commercial affairs of authorised persons—I assume that "such persons" refers to authorised persons. Although that is certainly part of what the principle is about, it is not the only thing. Additionally, I am not convinced that it would be very helpful to spell out the various elements in that manner.
Amendment No. 49 also seeks to address the issue of facilitating innovation, and the desirability of doing so. It would provide that the FSA should seek to ensure that it does not unnecessarily impede innovation. Although that is clearly an important consideration, it is covered adequately by the existing principle in the Bill and by other principles. If the FSA has regard to the desirability of facilitating innovation, it should not do things that unnecessarily impede it.
Earlier, I said that I was sympathetic to the general provisions of Opposition amendment No. 232. Although I ask the House to reject that version of the provision, I repeat my assurance that similar provision will be made—requiring that the director can request only

information that is relevant to his investigation, and reproducing a provision on documents currently in the clause—and that, later in the Bill's passage, we shall return to the issue and make changes if we think that they are necessary.
I hope that hon. Members will support the Government's new clauses and amendments in this group and oppose the Opposition amendments.

Sir Michael Spicer: Collectively, the Government new clauses and amendments in this group are quite admirable in their intent. The problem is that they are completely in conflict with the majority and thrust of the Bill. Clause 2 lists market confidence, public awareness and consumer protection as the regulatory objectives. Clauses 3 to 6 set out the details of the regulatory objectives. I still do not understand what promoting awareness will mean in practice for the FSA, but clause 5 covers the protection of consumers and specifies that the FSA must have regard to
the differing degrees of risk involved in different kinds of investment or other transaction … the differing degrees of experience and expertise that different consumers may have in relation to different kinds of regulated activity … the needs that consumers may have for advice and accurate information".
In other words, the Bill conflicts with the Government amendments and new clauses that we are discussing. It gives the FSA powers to intervene in the market, and even to promote and develop particular products, in the interests of consumer protection.
If the new clauses and amendments are passed, the Director General of Fair Trading will go rushing off to promulgate competition, but he will be pulled back because the Bill will require the FSA to intervene and distort the market—the opposite of competition.
The regulatory regimes that the Government are imposing right across the commanding heights of the British economy use the words—and often the institutions—of the previous, Conservative Administration. The Government amendments use words such as "consumer" and "competition", but they would achieve and impose the opposite of what the previous Government had in mind. The concept of fuel poverty, for example, is no doubt admirable, but it is being imposed as an overriding objective for the electricity regulator. Similarly, Oftel has been burdened with the concept of total coverage, and the Post Office with that of social obligations. Even the FSA is required to engage in the concept of social banking.
Such notions conflict with the objectives that the Conservative Government set for the regulatory bodies. The amendments are a perfect example of how we are seduced into believing that the Bill is about competition rather than its opposite. The intervention proposed in the Bill is the exact opposite of what is proposed in the amendments.
The previous Administration set up the regulatory bodies with competition as the primary objective. When I took the Bill to privatise the electricity industry through Standing Committee, it was clearly understood that competition and the protection of competition was the Bill's primary objective. The Conservative Government privatised the utilities across the board. The intention was that, once they began to benefit from competitive pressure, the regulatory bodies would begin to withdraw and retract. Control of the utilities and the interests of consumers would be left to market forces.
In the electricity industry, for example, the regulatory regime became lighter as competitive pressure built up. However, the exact opposite is happening under this


Government, and that is illustrated by the Bill: as competitive pressures increase, the Government's objectives move away from allowing the marketplace and competition to work and towards greater intervention.
It is precisely because these clauses will be made totally ineffective—I would say because of their hypocritical nature—that I object to them. They form, as the whole Bill forms, part of a panoply of new parallel government which is being set up throughout the commanding heights of the economy. It is socialism by the back door, nationalisation by the back door, and control and intervention by the back door, through the regulatory regime.

Mr. Beard: The clauses that so aggravate the right hon. Gentleman are there to provide for a watchdog over the Financial Services Authority, so that nothing it does unnecessarily impedes competition. That seems to be entirely reasonable. It divides the role on competition between the FSA and the Director General of Fair Trading. I do not understand why the right hon. Gentleman sees such dire consequences arising from what is plain common sense.

Sir Michael Spicer: For the precise reasons that I have given, the entire thrust of the Bill is in opposing directions. The objectives set for the FSA, in particular, are entirely opposite to that of competition. To have a fig leaf in the form of the new clauses will make it extremely difficult for the bodies that exist to oversee the tribunals and the various review arrangements in the Bill for overseeing the FSA. It will be extremely difficult to come to a judgment in terms of the law that we are passing, because the whole thrust of the Bill is in the opposite direction to competition; it is in the direction of protectionism and interventionism. Therefore, at the very best it will make it extremely difficult for the tribunals, other bodies and fair trading organisations to take a view, because, if we pass the Bill, they will face legislation the thrust of which is in opposing directions.
The Bill does not mention competition at all among the objectives of the FSA set out in clauses 2, 3, 4 and 5. I would argue that the objectives are exactly the opposite to competition, for the reasons that I have given.
At the very best, the Bill makes it impossible for the adjudicating bodies—there are one or two points where they are in the Bill—to take a view. At worst, it provides a fig leaf for the continuation of a regime that the Government are setting up across the board of regulation, which has as its objective not competition—though it uses the word often, just as it uses the words "consumer protection" and "consumer"—but the opposite: the imposition of political objectives that have to do with income redistribution, protectionism and interventionism. I object to the new clauses being introduced as a fig leaf for a policy that thrusts in the opposite direction to that which the Government profess.

Mr. Flight: Even the Government must have perceived some of the fundamental truth in the comments of my right hon. Friend the Member for West Worcestershire (Sir M. Spicer). I recollect a conference organised just before Christmas by the Treasury to focus on the arguments about the regulation of mortgages, where it was duly noted that the large players in the industry were asking to be regulated. An ironic comment was made by a certain senior Treasury official.
The large players welcome regulation. It raises the threshold of entry enormously. The innate tendency on regulation is towards consolidation and cartels. This point has been grasped very powerfully by Don Cruickshank, which is why he, like us, has called for the competition theme to be included in the key territory of objectives.
Let me get rid of one Government argument in the other direction, which is invalid. It is nothing to do with the concept of the FSA's being a regulator of competition. It has to do with the simple proposition that the objective of the rules and conduct of the FSA, and the way in which it handles them, should be to avoid doing things which damage either domestic competition or the UK's international competitiveness.
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The Government seek to buy off Don Cruickshank by means of what strikes me as an over-complicated mechanism, proposed in new clauses 27, 28, 29 and 32. The first reference to the proposals was made by the Chancellor of the Exchequer in his green Budget statement. This is yet another example of spin that turns out to be different from the reality. The Chancellor suggested then that the Competition Commission would be established as an independent body to direct the FSA to change rules that were damaging to competition, adding the footnote that the Treasury would have a reserve power.
The Bill, however, makes it clear that the commission will be piggy-in-the-middle between the Office of Fair Trading and the Treasury, and that only the Treasury is empowered to tell the FSA to change rules. Moreover, that power is hedged around. If the Treasury considers that there is a case for retaining a rule that protects consumers in regulatory terms, it will opt for retaining it even if it is uncompetitive.
That brings us full circle. Unless one of the FSA's key instructions from the public via Parliament is that it must do its best not to produce anti-competitive rules and regulations, it will tend to do anti-competitive things. It is ludicrous to set up all this complicated machinery involving the OFT, the commission and the Treasury without giving the FSA the right brief in the first place. While I hope that the machinery will lead to some useful analysis, it will undermine itself unless the FSA is given the right brief. Amendments Nos. 192 and 30 deal with that.
We will not press amendment No. 30, which I confess was tabled in the fear that amendment No. 192 might not be accepted. Amendment No. 192 makes our point. It deals with both domestic competition and international competitiveness, an issue that the OFT/Competition Commission machinery ignores. The United Kingdom's financial services industry has become our biggest employer, biggest exporter and biggest contributor to gross national product.

Sir Nicholas Lyell: When my hon. Friend said that the proposals for the Competition Commission ignored the issue of international competitiveness, the Minister shook her head, suggesting that he was wrong. I believe that he is right. Perhaps he will elaborate.

Mr. Flight: I thank my right hon. and learned Friend. I was about to elaborate.
The Government seem not to have made provision for what the Opposition want: the establishment of a unit in the OFT to monitor the international competitiveness of British regulations as against those of the United States, France or Switzerland, particularly for international business. Nor have they provided for either the commission, as originally suggested, or the Treasury, to be directed to change rules if they are found to be severely damaging our international competitiveness. I at any rate can find no such provision. I recollect a reference to the Competition Commission having to be aware of international competitiveness, but cannot remember where I saw it.
The huge recovery in Britain's international financial services industry in the past 30 years has rested on extremely competitive tax arrangements, technical ability and software administration. Those are all delicate matters. That is why the Chancellor of the Exchequer has fought so strongly to keep us out of the net of the European withholding tax. That is why the Government will have to change stamp duty arrangements—business will leak away elsewhere if we have an expensive stamp duty.
If our regulation is unclear or too expensive, or if it does not provide clear, safe harbours within its rules, a lot of international business will go to, or go back to, New York and other financial centres. How our regulatory regime compares with others is immensely important to employment and the prosperity of the industry. As Howard Davies has so often said, good regulation is an asset; bad or unclear regulation a liability.
If there is a serious desire to control the inevitable tendency of regulation to lead to a lack of competitiveness and to create cartels and consolidation, the regulator must have an upfront brief as an objective not to do that, which will be as important as his other objectives. We welcome the proposed monitoring, and will see how it goes, but to have such an expensive and complicated mechanism simply to monitor domestic competition and not international competitiveness is to miss out half the key point.

Mr. Cousins: I am following the hon. Gentleman's argument and am studying the proposals in amendment No. 49 extremely closely. If the amendment were accepted, would it encourage the Financial Services Authority or the relevant competition authorities to regulate such matters as, for example, the introduction of charges by bank cartels for access to their cashpoint machines, or would it deter them?

Mr. Flight: I was actually talking about amendment No. 192, the key amendment, which would add competition and competitiveness to the list of objectives. Amendment No. 49, which the Minister has referred to as our "seek to" amendment, is designed to beef up the second part of clause 2, which deals with principles. The phrase "have regard to" in the clause as drafted is extremely woolly. Indeed, although the FSA repeats that phrase in its literature and brochures, it has made it very clear that it views the objectives as far weightier than the so-called principles.
Secondly, I think that the part of the amendment to which the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) may have referred is that which calls upon the regulator not to interfere unduly and unnecessarily in the internal management of businesses. However, it all depends on the justification. If a bank cartel charges in a cartelised fashion, the regulator has every justification for interfering.

Mr. Cousins: May I draw the hon. Gentleman's attention to paragraph (b) in amendment No. 49? Does he understand that as inhibiting the capacity of a regulator or a competition authority to deal with such matters as charging for access to cashpoint machines? The provision would seem to have that effect.

Mr. Flight: The hon. Gentleman is referring to the provision that I mentioned. The amendment calls on the authority not to interfere unnecessarily in the management of the commercial affairs of the businesses or persons whom it is regulating. The provision is clear; in no way would it fetter the activity of the regulator, where the regulator perceives the operation of cartelised pricing practices. Indeed, as I have pointed out, the real problem is that regulation encourages such cartelised practices.
The purpose of the amendment is clear. If the FSA was carrying out its regulatory duty, and if it were set to do its competition duty, it would get on with it. If the authority extended its activities beyond that, as is the tendency of bureaucracies, it would be restrained. Under the provision, competition is required to be an objective; in many cases, the right action of the FSA depends on competition being an objective.

Sir Michael Spicer: The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) wants to intervene, to stop people doing things and to run things by bureaucracy, whereas my hon. Friend is making a brilliant case that it all depends on whether the practice is anti-competitive. If there is a purely commercial judgment, in which transparency comes into charging, that is good, if it would improve competition. My hon. Friend is correct to draw that distinction. Labour Members do not want to make that distinction; they want to interfere come what may.

Mr. Flight: The point is clear.

Mr. Cousins: Will the hon. Gentleman respond to the point made by his hon. Friend the Member for West Worcestershire (Sir M. Spicer)? Is it the policy of the official Opposition that charges should be introduced for access to cashpoint machines, in the interests of transparency of costing?

Mr. Flight: The hon. Gentleman seems to be intervening in a most incoherent fashion. I have made it clear that the policy of the Opposition is, first, in favour of competition, which represents an important protection for consumers. Secondly, in attempting to get the measure right, there is a risk that regulation will damage competition, in exactly the ways to which the hon. Gentleman referred—thus the need for competition as an


objective. Thirdly, as the measure is about checks and balances, it is unreasonable for the regulator to have powers to ferret into businesses, other than where justified under its objectives. If part of its objective is that it is supportive of competition, it would be empowered in the whole matter of banking cartels. The hon. Gentleman may be surprised to learn that the person whom the Government have appointed to examine banking competition, Don Cruickshank, entirely agrees with our views. The compromise is insufficient to achieve his objective of the more competitive banking system that we and the hon. Gentleman want.

Mr. Beard: Such arguments have been rehearsed before. On each occasion, the case made against including competitiveness as an objective of the Bill is that under the Competition Act 1998 there exists the Competition Commission. To give authority for regulating competition to the FSA in respect of financial matters would mean two organisations regulating one sector of the economy, which could lead to nothing but muddle.
The second argument reflects the importance of competition, which is acknowledged by hon. Members of all parties. It is far more powerful to have a separate watchdog over the FSA's activities that takes steps to regulate competition when a breach occurs than to incorporate safeguards in the organisation that we want to avoid breaching competition.
Those arguments have never been answered by the Opposition in their continual efforts to promote the idea that competitiveness is neglected.

Mr. Flight: The hon. Member could not have been listening. We are not calling for the FSA to regulate competition. We argue that in its rule making, a key objective should be not to regulate in a way that damages competition or international competitiveness but in a way that increases competition. That has nothing to do with the role of a competition regulator. We entirely agree that the Office of Fair Trading and the Competition Commission should cover that territory.
It would be extraordinary to incur the expense and burden of the OFT and commission in monitoring to ensure that the FSA is not making rules damaging to competition if it is not a priority instruction to the FSA to avoid so doing. That is just making jobs for people by having the FSA wrongly briefed. That is a clear answer to the bogus argument about making the FSA a competition regulator.
We are reasonably happy with the machinery, although we question what the Competition Commission adds. We imagine that OFT investigations will be at a more general level and the commission will undertake something more in-depth before passing a recommendation to the Treasury. That would put in another process which might not be entirely necessary; but reviewing competition to secure against anti-competitiveness is a good and sensible objective. We believe that there should be a parallel requirement in respect of international competitiveness. To complete the logic of the scheme, it needs to be made clear to the FSA that its regulation is to be competition friendly rather than unfriendly and competitiveness friendly rather than unfriendly.

Sir Nicholas Lyell: This is the most important debate on Report and we are focusing on the most important subject that is at all controversial. I say, I hope with reasonable humility, that there is serious misunderstanding in this Chamber and the Government of the distinctions between competition and international competitiveness. The roles that the Competition Commission and the Director-General of Fair Trading are being given by the Government—which we welcome—have nothing to do with international competitiveness. I should be grateful if the Economic Secretary would nod to show that she recognises that, and to show that she recognises that they are concerned with the avoidance of distortion of or interference with competition in the UK market. That is their function under the Competition Act 1998.
Those bodies have two main functions—the avoidance of cartels and anti-competitive agreements, and the avoidance of businesses being able to exploit dominant positions. It is desirable that nothing in the regulatory system that the Bill proposes should distort competition within the UK. That much is desirable, and I support the Government's new clauses on that matter.
That is not the issue between the Government and the Opposition. The issue is the promotion of the UK market and its international competitiveness with the United States, Japan, France and Germany. It is important to decide whether, as we say in amendment No. 192,
the maintenance of competition and promotion of UK competitiveness
should be made an objective in the Bill. We say that it should, as that is fundamental to the success of the City of London and of the financial services industry that the FSA will regulate. That will be to the benefit of consumers here and worldwide.
If we have a healthy, vigorous and competitive market, consumers in this country are likely to get better value. I should have thought that, with new Labour, there could be agreement that vigorous competition is, in the end, the best regulator. It should not be the only regulator—we are not arguing for that. However, it is the best of all, and I am pleased to see that the Economic Secretary and the Financial Secretary agree with that sentiment. What follows from that common recognition is that that matter should be an objective under the Bill. We should not deceive ourselves.

Miss Melanie Johnson: indicated dissent.

Sir Nicholas Lyell: The Economic Secretary is now shaking her head, but I ask her to listen for a moment. Why is it not good enough that the proposal is simply what is described, rather grandiosely, as a principle under clause 2(3)? Why is it necessary—in my opinion and that of my hon. Friends—that it should be an objective in clause 2(2)? This is fundamental to the structure of the Bill and to what we are seeking to create.
There is an important difference in the wording between clause 2(2), which deals with the objectives, and clause 2(3). Clause 2(1) states that the FSA must
so far as is reasonably possible, act in a way which is compatible with the regulatory objectives".
Clause 2(2) sets out the objectives, and clause 2(3)—which deals with what some have called the principles—says that the FSA must "have regard to" the principles.
Paragraphs (d) and (e) are the key. Paragraph (d) refers to
the desirability of facilitating innovation in connection with regulatory activities",
and paragraph (e) refers to
the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom".
We must recognise how much weaker the words "must have regard to" are when compared with the words
must, so far as is reasonably possible, act in a way … which is compatible",
which are used about the objectives. The words relating to the objectives are intended to be stronger—and they are stronger. The fact that they are intended to be stronger means that each of the four objectives that are set out in clause 2(2) is specifically analysed and expanded upon in clauses 3, 4, 5 and 6.
The objectives are market confidence, public awareness, the protection of consumers and the reduction of financial crime—all worthy objectives which we support. However, it must be remembered that all those objectives will tend to increase the weight of regulation and the requirement on the authority to ensure that it—I almost said darned well—regulates.
Clause 2(3) then tells us that the authority must have regard to other desirable aims, including our international competitiveness. However, that is put too low. The Minister replied with a carefully crafted portion of her speech. I realise that it was rightly pored over by her advisers. She said that the Government had reconsidered everything and thought that it was right and adequate simply to mention the competitive position of the United Kingdom as something to "have regard to". That puts the aim far too low.
Let me meet what might be the counter argument. One could argue that if maintaining our competitiveness was an objective, it would make the other four objectives impossible to achieve. That argument does not hold water. If one had five objectives instead of four, with the maintenance of the competitive position of the United Kingdom as one of them, one would set exactly the right balance. In a sense, one would lift a little bit of responsibility off the FSA. If the FSA under-regulates at present, it can be criticised for failing to meet its objectives. However, if it over-regulates, it will at least meet them. If one points out that it does not have regard to the desirability of international competitiveness, it will say that it paid regard to that, but that it had to strike a balance. That will result in over-regulation.
Why is that approach damaging? I want to refer to a speech made recently by the Lord Mayor of London, when he described in simple statistical terms the relative competitive positions of the City of London and of our competitors in New York, Frankfurt, Tokyo and so on. If London had a base figure of 100, the costs of doing business in New York were said to be 117; in Japan 134; in Paris 154; and in Frankfurt 163. Two things threaten our competitive position. One of them is stamp duty and the other is the burden of regulation. Everyone should have regulation, but over the past few months we have been thinking about—and I know that Ministers have—

how we can make regulation not too expensive and burdensome. That is the balance that we must get right. Clause 2 sets the scene and it would be a better clause if it put the objective of our international competitiveness upfront and not down among the things that we must have regard to.

Mr. Cousins: I remind the right hon. and learned Gentleman that the first of the regulatory objectives set down by the Government is market confidence, a concept which embraces both competition and competitiveness. If the Opposition's new regulatory objective were added, what would a regulator do to deal with a bank that had inadequate capital, but was trading both in the UK and abroad? In that case, the regulator would be faced with a conflict of objectives. That would be wrong. The regulator should focus on market confidence as the single most important objective embracing both competition and competitiveness. It should judge its actions in the light of the need to protect market confidence and not be confused by any other consideration.

Sir Nicholas Lyell: The hon. Gentleman might be right in one part of his intervention; I shall wait to find out whether Ministers think that he is. If he is, he has sold the pass—I withdraw that remark, which is not a kindly way of expressing myself. However, he is wrong in the other part of his intervention. If market confidence includes our international competitiveness, it is plainly acceptable to put that up among the regulatory objectives. Therefore, I am delighted to have the hon. Gentleman's support.

Mr. Tyrie: The Bill clarifies the meaning of "market confidence" in clause 3, which states:
The market confidence objective is: maintaining confidence in the financial system.
That is a matter of systemic risk—making sure that the financial system is not imperilled and does not collapse. It has no bearing on whether the financial system is more or less competitive, and no reasonable reading of clause 3 would ever lead one to suppose that it did.

Sir Nicholas Lyell: My hon. Friend is entirely right. Unfortunately, although I would like to think that the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) has made a point with which Ministers can agree, I do not believe that he has.
I do not think that there would be any serious problem with disciplining an undercapitalised player in the market. The fact that the FSA had to consider as an objective our international competitiveness could not possibly inhibit its putting out of business a player who lacked sufficient capital. Nothing could damage the UK's international competitiveness more swiftly than significant players in the UK market going down the drain for lack of capital.
The amendment of the Bill in this respect is the most important point that we shall discuss today. I should like to think that Ministers will offer to go away and reconsider the matter, and I am quite happy that they should agree to do so without obligation. It is highly desirable that they should think again, even if correction has to wait until the Bill is debated in another place.

Mr. Timms: Amendment No. 192 refers to
the maintenance of competition and promotion of United Kingdom competitiveness.
However, the right hon. and learned Gentleman has concentrated so far on the competitiveness aspect. Does he envisage greater importance attaching to that than to competition, which has previously appeared to be the main focus of Opposition concern?

Sir Nicholas Lyell: That brings us back to a matter of language, and I am grateful to the Financial Secretary for enabling me to clarify the position.
As I understand his remarks, the hon. Gentleman uses the word "competition" to mean competition within the United Kingdom as regulated, supervised and controlled by the Competition Commission, the Director General of Fair Trading, and so on. That is important, but that was never the key thrust of the Opposition's concerns regarding competitiveness; obviously, we failed to make our point.
There was a period—it may even have extended into this debate—when "competition" and "competitiveness" were used interchangeably. There may have been room for confusion. We support what the Government are doing vis-à-vis the non-distortion of the market by the anti-competitive effects of regulation within the UK market. That is good and detailed and it has my support. However, it does not meet our overall concern, which is that the burden of regulation and the manner of it could damage our international competitive position. That is where further thought is needed, and that is where the Bill needs to be adjusted.

Sir Michael Spicer: I may have misheard one of my right hon. and learned Friend's earlier remarks, but I thought I heard him say that the best regulator was competition in the first sense in which the Minister gave it. I understood my right hon. and learned Friend to say that that was at least as important in terms of regulation as international competitiveness.

Sir Nicholas Lyell: My hon. Friend is right. Again, we are into the matter of language. The best regulator is competition in that it keeps businesses up to the mark and makes them provide better products. It possibly makes it less, rather than more, likely that people will be charged for using their access cards in various machines. Competition is plenty of good, healthy businesses competing with one another. It does not matter whether the business is a United Kingdom bank or an American or Japanese bank. In one sense, the healthy effect of competition is the best regulator. However, there is common ground between us that we need regulation as well. That is the subject of the Bill, and in this instance we are discussing the objectives that should be put to the regulators.
I am arguing, in accordance with amendment No. 192, that we should make as part of the objectives not only competition in the internal UK sense in which the Minister and I understand it, but our international competitiveness. That is deeply important.

Mr. Beard: The right hon. and learned Gentleman has introduced the international dimension to the debate. Will he say what would happen to the FSA if it went into

international negotiations to establish an international regulatory arrangement, if it had at the centre of its objectives the maintenance of competition and promotion of United Kingdom competitiveness? Those with which it was negotiating would say immediately, "This country is not negotiating to establish the integrity of international financial arrangements. It is negotiating to give the United Kingdom a strong competitive edge." The negotiations would therefore fail.

Sir Nicholas Lyell: The hon. Gentleman is probably wrong about that, but in any event it is not what we are discussing. If we were setting up an international regulatory system, which is not what we are doing—you will call me to order, Mr. Deputy Speaker, if I go on too long about this—but which to some extent we have under European directives, our objective would at least be to ensure that the international competitiveness of the United Kingdom would not be damaged by that system. The hon. Gentleman can go along with me to the extent that it should be one of our objectives to safeguard—I think that "promote" is a perfectly fair word—our international competitiveness. I understand the point that the hon. Gentleman is making, but I think that he makes too much of it.
I stand by the desirability, as I thought we all did, of the United Kingdom financial services market being highly competitive. That is our objective. I shall conclude with the words of Don Cruickshank in his letter to the Chancellor of the Exchequer of 22 July 1999. When asked to look at the international position vis-à-vis the banking sector, he made the following point:
Our priority should be to develop a strategy for striking the optimal balance between competition and necessary regulation. In the search for a higher sustainable growth rate for the UK beyond a stable low inflation macro-economic climate, there is in my view nothing more worth while for government to do than to get this balance right.
At the moment we have not got it right, and our new clause would help us to do so.

Mr. Tyrie: It is annoying to speak after my right hon. and learned Friend because one always finds that he has stolen a little of one's thunder. I had intended to quote the same passage from the Cruickshank report. However, I am sure that I shall find other passages on which to draw.
The absence of a countervailing pressure on the FSA to set against the urge to regulate lies at the heart of the our anxieties about the Bill. We have said from the start that stronger provisions to inculcate competition and encourage international competitiveness should be included in it. Despite the Government's new clauses, such provisions will remain lacking.
There are three major lacunae. First, the FSA's overwhelming incentive will be to watch its back so that no one accuses it of failing to regulate strongly enough. When Conservative Members said that in Committee, we were accused of simply representing City interests. However, the consumer will pay for excessive regulation to ensure that the FSA watches its back. The consumer always pays when competition is eroded through increased regulation. The failure to strike a balance between regulation and competition, to which my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) alluded, is a central weakness in the measure.
The second lacuna relates to the point that my hon. Friend the Member for West Worcestershire (Sir M. Spicer) made a moment ago. It is not sufficiently well understood that competition acts as a regulator. It is often the best regulator. That applies especially to new entrants into a market. The scope for new entry into a market is especially vulnerable to high levels of regulation because the detailed knowledge that is required to get into a market inhibits new entrants. However, new entrants often create greater competition—that is the so-called theory of creative destruction that Schumpeter propounded in the 1930s. He argued that competition was not necessarily achieved through lower prices, but through people entering markets and offering new and better products.
My right hon. and learned Friend the Member for North-East Bedfordshire alluded to the third lacuna. It is competitiveness, on which the Bill is almost silent. The Financial Secretary to the Treasury asked an important question, and was thinking his way through to the answer as he listened to my right hon. and learned Friend's response. Improved competition will almost always lead to improved economic performance, but better regulation may make no difference. Indeed, competitiveness could be eroded by regulation that is introduced to ensure that there is no miscreant or bad apple in the barrel. That trade-off goes to the heart of our anxieties.
The Government's response has been to deny the fact that there is a trade-off between regulation and economic performance. They claim that perfect regulation will lead to maximum probity and credibility in the market, and to respect for the product from consumers and foreign counterparts. According to that theory, there is no need for checks and balances in the system because there is a happy coincidence of interests between optimal regulation for the prevention of financial crime and misdemeanours, and optimal economic performance. Regrettably, that is not the case. There is a tension between those two objectives and the FSA will have to deal with it—day in, day out. Our concern is that that balance has not been addressed properly by the Bill, which is why we have tabled amendments so vigorously. We believe that the FSA must be required by statute to take that trade-off fully into account, and the only way to achieve that is by including competition in the Bill as an objective.
6 pm
Cruickshank's report is important in that respect. I do not know the official Opposition position on it, but I think that it is an outstanding and brief exposition that anyone interested in these matters should read. It talks about striking the right balance—the very balance to which I have alluded. Cruickshank made that a sub-heading of the document and his letter to the Chancellor described the trade-off between the objectives of regulation and economic performance, but I will not detain the House by reading the passage out.
The question of whether the Government's new clauses respond adequately to the Cruickshank report and take those concerns into account is crucial. They were tabled only a few days ago. As they deal with the heart of what we have been discussing for months and months, it would have been immensely helpful had they been tabled earlier. The report was published in July, but the competition

clauses were not dealt with in Committee until November, so although the Government had ample time, they waited until the Bill was on Report to table new clauses. Conservative Members, the House, the City and the industry all regret that.
How far have the Government gone towards meeting Cruickshank's six recommendations? I shall not go through them all, but should refer to two. The most important recommendation is the first. The report unequivocally states:
the FSA should have a primary competition objective, in addition to its regulatory objectives.
It forms the second, emboldened paragraph of annexe 3—it is crucial. Cruickshank says, more or less, that unless it is implemented, all his other recommendations, whether implemented or not, will be mere sticking plaster to patch up something that will inevitably be inadequate and second best. On page 13, he says:
Getting the regulator's primary statutory duties right is essential … A competition objective that is weak relative to the regulator's other objectives is unlikely to be delivered effectively.
He makes it clear that his other recommendations would be far less effective without that central objective, but that is exactly the route the Government have taken. They have left competition as a principle and introduced changes to the competition regime without including it in the Bill as a central objective, although they have moved on Cruickshank's other recommendations, reducing the extent of the financial sector's exclusion from general United Kingdom competition law and strengthening Office of Fair Trading oversight. There has been some progress.
The Government have failed to take up Cruickshank's unequivocal recommendations on a further crucial question. The report said that the Competition Commission's findings, not those of the Treasury, should be the final arbiter. I remain concerned that the revised new clause leaves much more discretion to the Treasury than initially appears to be the case. The Minister has gone some way towards assuring me about subsection (3)(a), but I remain concerned about the wording and about what "exceptional circumstances" could be taken to mean.
The Treasury can decide that there are exceptional circumstances, so that it can overrule—

Miss Johnson: indicated dissent.

Mr. Tyrie: The Minister shakes her head as if I am getting this wrong. If I am wrong I should be grateful if she would clarify where in the Bill "exceptional circumstances" are explicitly limited so that we can be sure of what the phrase means. Can she do that and go beyond the mere assurances that she has already given us?

Miss Johnson: Briefly, I have described how "exceptional circumstances" are to be regarded. I gave the assurance that any reason why the Treasury had to override any proposal or report would be laid before the House and we would expect debate on it. I covered that fully in my earlier remarks.

Mr. Tyrie: What assurance do we have that the Treasury cannot define "exceptional circumstances" widely? All we have are the Minister's assurances. We do


not have any statutory limitation to the exercise of the Treasury's power in this area. I hoped that there would be and I remain concerned about the drafting of new clause 29 as a consequence.
The Government's new clauses remain out of kilter with Mr. Cruickshank's central demands. He demanded that the Treasury be kept out of this altogether, but that is not what we have. He said that we should avoid a blurring of responsibility for the delivery of the competition objective, but we have blurring. The competition objective is weakly included in the FSA statement of principles. The OFT is to play a major role, the Competition Commission is to be an appeals system and the Treasury has the power of override, limited by the phrase "exceptional circumstances" which is as yet untested.
If the Minister is to reply, I should be grateful if she could clarify one point. As I understand it, under the Competition Act 1998, a ruling by the Competition Commission may go to appeal on a point of law. Would the FSA have the right to appeal against a Treasury ruling in the event of there being a dispute on a point of law, or is the FSA excluded from access to the courts in this area?
More generally, I remain concerned that Cruickshank's primary recommendations have been wholly ignored. As he himself makes clear, without that first basic building block of competition as a primary objective, most of his other recommendations will be difficult to implement. Furthermore, in the long run, the dynamic effects of the inadequate treatment of competition could be profound for the City. He points to the danger of damage to the City through inadequate consideration of the dynamic effects of weakened competition.
Finally, as my right hon. and learned Friend the Member for North-East Bedfordshire said a moment ago, the FSA is required to have no more than "regard to" the United Kingdom's competitive position. That is hopelessly inadequate. Of all the provisions in the Bill, that is the one that I hope we will find legislative time to put right when we return to power, which we will.

Miss Johnson: It will happen a long time from now, then. It has been difficult at times to understand whether the Opposition's view is that competition should become an objective, or that competitiveness should. Conservative Members have each advanced different arguments. I am left uncertain as to what the official Opposition view is. May I explain the Government's view?

Mr. Flight: rose—

Miss Johnson: Clearly, I am about to get clarification. I am grateful to the hon. Gentleman.

Mr. Flight: Amendment No. 192 sets out that which we wish to add as an objective: competition and competitiveness.

Miss Johnson: The amendment sets out what the hon. Gentleman wishes to do, but I am still not clear what Conservative Members' real position is and what the real Opposition view is. Let me tackle both questions.
If competition is an FSA objective, it will, in effect, become another competition authority. It will also have competing objectives. In the event of conflict, it would go either down a particular path, or down no particular path,

under certain conditions. It will leave the FSA in considerable difficulty as it carries out the objectives. It is not appropriate for competition to be an FSA objective.
I endorse the enthusiasm with which the hon. Member for West Worcestershire (Sir M. Spicer) pushed for recognition of the importance of competition and competitiveness. The Government recognise both the importance of competition and the value of competitiveness. We think that they are both important. None of us in the Chamber disagrees about that. We disagree about what the effect of including competition in the FSA's objectives would be and what the effect is of where it appears: under the principles in clause 2(3). We looked at the matter at considerable length. We responded to the Cruickshank review in July. A press release was issued when the matter was discussed in Committee in November. Don Cruickshank said:
I am not wedded to any particular means of achieving this, and I will welcome any changes to the Bill which deliver the outcome in practice.
The only issue has been how to deliver that in practice. There is no disagreement about the fact that competition is important and must be an issue that the FSA has regard to in all its dealings as a regulator.

Sir Nicholas Lyell: The Minister said that if competition and competitiveness were made an objective, it would make the FSA a competition regulator and a competition authority. Will she please reconsult her advisers and inform herself that that is nonsense? It would have no such effect. It would not put the FSA into the position of the Competition Commission, which seems to be what she fears. It would do what I am pleased to hear there is common ground about: put the competitiveness of the UK financial service markets in the Bill as an objective.

Miss Johnson: I do not agree with the right hon. and learned Gentleman on that, and I shall not change my comments on the matter. We already have a body whose prime responsibility is to ensure that competition is engaged in wholeheartedly in all sectors of the economy, and that body is the Competition Commission. The commission, not the FSA, has that role and those functions. The Government do not disagree with his point that the FSA must have regard to competition. As I said, we considered different formulations of "regard to".

Sir Nicholas Lyell: The Minister said that she disagrees with what I have said. Will she examine the record, write me a letter explaining why she disagrees, and place a copy in the Library?

Miss Johnson: I shall consider the right hon. and learned Gentleman's request, although I am not sure that any useful purpose would be served by my complying with it.
As I explained, if there were a better formulation of "must have regard to", it is certainly not "seek to", as that would weaken the provision's force.
We have considered how best to address the competition issue in the formulation of the Bill's wording. As clause 2(3) states, in conducting its business, the authority must have regard to various specified principles. We believe that the strength of the injunction and the duty


imposed on the authority by the subsection will ensure that, in seeking to achieve its objectives, the authority will give full consideration to all aspects of its duty, including the particularly contentious issue of competition and competitiveness.

Sir Michael Spicer: I am grateful to the Minister for giving way, not only because of the lateness of the hour, but because, earlier she said that she was on my side—which seemed to worry the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) a bit. However, if there are various bodies with different objectives, how will we decide who should win?

Miss Johnson: We drafted the clause with that in mind.
Many hon. Members expressed an interest in the United Kingdom's international competitiveness. Clause 2(3)(e) provides that, in performing its duties, the authority must have regard not only to competition, but to
the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom".
That requirement has now been encapsulated and included in the principles governing how the FSA does its business. It also addresses the issue of whether it is appropriate to impose such an obligation on the FSA. Some aspects of competitiveness are the Government's responsibility. There are aspects of competitiveness that are the industry's responsibility. The Bill encapsulates the responsibilities of the FSA in that regard.
The hon. Member for Arundel and South Downs (Mr. Flight) called the Competition Commission the piggy-in-the-middle in this matter. That is most unfair. The Competition Commission will take the place occupied by Ministers in the competition scrutiny regime. It, rather than Ministers, will take the final decision on whether a rule or practice is anti-competitive, or whether it is justified. The commission's decision will stand and will be put into effect, unless exceptional circumstances—some of which I set out earlier—lead Ministers to a different conclusion. Far from being the piggy-in-the-middle, the Competition Commission will be the final arbiter of competition matters.
Finally, several hon. Members have said how important it is to get the right balance between competition and competitiveness, and regulation. All have their proper role to play, but it is misleading to suggest that good regulation is anything other than an asset. The circumstances governing the competitiveness of the City of London are important, but so is the very good regulation in the UK, which continues to assure the City's position in the global market.

Sir Nicholas Lyell: The Minister is disagreeing with Don Cruickshank, the whole point of whose report was to tell the Government that the "have regard to" formula in clause 2(3), on which she is relying, is too weak. The report called on her to extend the regulatory functions in clause 2(2) to cover the requirements set out in clause 2(3).

Miss Johnson: As I said earlier, in his comments on his interim report and the Bill, Don Cruickshank said that

he was not wedded to any particular means of achieving the balance between competition and competitiveness. We do not believe that the Opposition amendments would be useful in that regard, whereas we consider that the Government amendments will achieve the balance that we seek. They give full force to the role of competition when the FSA considers how it should perform its business.
I commend the measures to the House.

Mr. Heathcoat-Amory: The debate has been about a fundamental aspect of the Bill that goes to the core of what the FSA is set up to do. The Minister's responses have not measured up to the importance of the subject, and there has been no real attempt to answer the many questions of Opposition Members.
The Liberal Democrats tabled one sad little amendment that was not selected. That lack of enthusiasm is not surprising: almost no Liberal Democrat Members turned up to the sittings of the Standing Committee, which ran from last July to just before Christmas. Given that they could find no one to man the Benches then, it is hardly surprising that none has intervened in the debate. But given that that party is inclined to lecture the rest of us about the need for parliamentary scrutiny and all the changes it wants to improve it, it is treating the House with some contempt when it does not bother to put in the hours and the work to hold the Government to account on a Bill of this importance.
The Minister started her last speech rather unfortunately by saying that she was not clear whether we supported competitiveness or competition, when it is perfectly clear in our amendments, particularly amendment No. 192, that it is both. All my right hon. and hon. Friends who have spoken have made perfectly clear their concerns about both. If the hon. Lady has not understood our position on that, she cannot have been listening to us.
It is really quite simple: we want to elevate the importance of competition at home and the maintenance of international competitiveness to being an objective of the FSA. At present they are referred to as principles to which it must have regard. We are trying to do so on behalf of consumers at home, who will be better protected by a fully competitive market, and the million or so people who work in the industries concerned, whose jobs depend on maintaining international competitiveness.
This is a vulnerable, fragile market in a ferociously competitive global environment. Nothing that the regulator does must needlessly undermine that competitiveness. Therefore, it is essential that it be elevated from being simply a principle to which the authority must have regard to an objective that must be pursued. That is why Mr. Cruickshank in his report emphasised the importance of making competition an objective in the Bill.
Instead of that comparatively simple approach, the Government now wish to erect a fantastically complicated bureaucratic system, whereby supposed inadequacies in the Bill and in the way in which the FSA exercises its authority on this subject are referred to the Director-General of Fair Trading, then to the Competition Commission and then to the Treasury, which will have the final say, and then back to the authority to make the changes. How much better it would be to put in the Bill the duty, the obligation, the requirement, the objective of competition so that the FSA can do it right at the start.

Sir Nicholas Lyell: Does my right hon. Friend agree that this is all pointless on the key question


of international competitiveness, because under the Competition Act 1998 none of these important bodies has any role in that repect whatsoever?

Mr. Heathcoat-Amory: My right hon. and learned Friend reminds me of that essential point. International competitiveness is nothing to do with the authority's duty, so that would go entirely by the board.

Mr. Cousins: rose—

Mr. Heathcoat-Amory: I hope that the hon. Gentleman will forgive me if I do not give way. I am concluding.
To express our dismay over the way in which the whole issue of competition has been handled, we shall divide the House on new clause 27, as a mark of our suspicions and doubts not only about the new competition authority, but, more important, about the Government's wholesale rejection of our alternative approach, which would be simple and which has the support of outside commentators and experts, including Mr. Don Cruickshank. We believe that a Division is essential to demonstrate those points.

Question put, That the clause be read a Second time:—

The House divided: Ayes 282, Noes 124.

Division No. 53]
[6.28 pm


AYES


Adams, Mrs Irene (Paisley N)
Campbell, Alan (Tynemouth)


Ainger, Nick
Campbell, Rt Hon Menzies (NE Fife)


Ainsworth, Robert (Cov'try NE)



Alexander, Douglas
Campbell, Ronnie (Blyth V)


Allan, Richard
Cann, Jamie


Allen, Graham
Caplin, Ivor


Anderson, Donald (Swansea E)
Casale, Roger


Anderson, Janet (Rossendale)
Cawsey, Ian


Armstrong, Rt Hon Ms Hilary
Chapman, Ben (Wirral S)


Ashton, Joe
Chaytor, David


Atkins, Charlotte
Clark, Dr Lynda (Edinburgh Pentlands)


Austin, John



Ballard, Jackie
Clarke, Eric (Midlothian)


Banks, Tony
Clarke, Rt Hon Tom (Coatbridge)


Barnes, Harry
Clarke, Tony (Northampton S)


Barron, Kevin
Clelland, David


Battle, John
Clwyd, Ann


Bayley, Hugh
Cohen, Harry


Beard, Nigel
Coleman, Iain


Beckett, Rt Hon Mrs Margaret
Colman, Tony


Beith, Rt Hon A J
Cook, Frank (Stockton N)


Bell, Martin (Tatton)
Corbett, Robin


Bell, Stuart (Middlesbrough)
Corbyn, Jeremy


Benn, Hilary (Leeds C)
Cotter, Brian


Benn, Rt Hon Tony (Chesterfield)
Cousins, Jim


Bennett, Andrew F
Cranston, Ross


Benton, Joe
Cryer, John (Hornchurch)


Berry, Roger
Curtis-Thomas, Mrs Claire


Best, Harold
Darvill, Keith


Betts, Clive
Davey, Valerie (Bristol W)


Blackman, Liz
Davidson, Ian


Blears, Ms Hazel
Davies, Rt Hon Denzil (Llanelli)


Blizzard, Bob
Dawson, Hilton


Bradley, Keith (Withington)
Dean, Mrs Janet


Bradley, Peter (The Wrekin)
Denham, John


Brand, Dr Peter
Dismore, Andrew


Breed, Colin
Dobbin, Jim


Brinton, Mrs Helen
Donohoe, Brian H


Brown, Rt Hon Nick (Newcastle E)
Dowd, Jim


Browne, Desmond
Drew, David


Burden, Richard
Eagle, Angela (Wallasey)


Burnett, John
Eagle, Maria (L'pool Garston)





Edwards, Huw
Liddell, Rt Hon Mrs Helen


Efford, Clive
Lloyd, Tony (Manchester C)


Ellman, Mrs Louise
Llwyd, Elfyn


Ennis, Jeff
Lock, David


Fearn, Ronnie
Love, Andrew


Field, Rt Hon Frank
McAvoy, Thomas


Fisher, Mark
McCabe, Steve


Fitzpatrick, Jim
McCartney, Rt Hon Ian (Makerfield)


Flint, Caroline



Follett, Barbara
McDonagh, Siobhain


Foster, Rt Hon Derek
Macdonald, Calum


Foster, Don (Bath)
McDonnell, John


Foster, Michael Jabez (Hastings)
McGuire, Mrs Anne


Foster, Michael J (Worcester)
McIsaac, Shona


Gapes, Mike
McKenna, Mrs Rosemary


Gardiner, Barry
Mackinlay, Andrew


Gerrard, Neil
Maclennan, Rt Hon Robert


Gibson, Dr Ian
McNulty, Tony


Godsiff, Roger
MacShane, Denis


Goggins, Paul
Mactaggart, Fiona


Gordon, Mrs Eileen
McWalter, Tony


Griffiths, Jane (Reading E)
McWilliam, John


Griffiths, Win (Bridgend)
Mahon, Mrs Alice


Grocott, Bruce
Marsden, Gordon (Blackpool S)


Grogan, John
Marshall, David (Shettleston)


Hain, Peter
Marshall-Andrews, Robert


Hall, Mike (Weaver Vale)
Maxton, John


Hall, Patrick (Bedford)
Meale, Alan


Harris, Dr Evan
Merron, Gillian


Heal, Mrs Sylvia
Michie, Bill (Shef'ld Heeley)


Healey, John
Milburn, Rt Hon Alan


Heath, David (Somerton & Frome)
Miller, Andrew


Henderson, Ivan (Harwich)
Mitchell, Austin


Hepburn, Stephen
Moore, Michael


Heppell, John
Moran, Ms Margaret


Hesford, Stephen
Morris, Rt Hon Ms Estelle (B'ham Yardley)


Hewitt, Ms Patricia



Hill, Keith
Mountford, Kali


Hoey, Kate
Mudie, George


Hood, Jimmy
Mullin, Chris


Hope, Phil
Murphy, Denis (Wansbeck)


Hopkins, Kelvin
Murphy, Jim (Eastwood)


Hoyle, Lindsay
Murphy, Rt Hon Paul (Torfaen)


Hughes, Kevin (Doncaster N)
Naysmith, Dr Doug


Humble, Mrs Joan
O'Brien, Mike (N Warks)


Hurst Alan
Olner, Bill


Hutton, John
O'Neill, Martin


Iddon, Dr Brian
Organ, Mrs Diana


Illsley, Eric
Pearson, Ian


Ingram, Rt Hon Adam
Pendry, Tom


Jackson, Helen (Hillsborough)
Perham, Ms Linda


Jenkins, Brian
Pickthall, Colin


Johnson, Alan (Hull W & Hessle)
Pike, Peter L


Johnson, Miss Melanie



(Welwyn Hatfield)
Plaskitt, James



Pollard, Kerry


Jones, Helen (Warrington N)
Pond, Chris


Jones, Ms Jenny (Wolverh'ton SW)
Pope, Greg



Pound, Stephen


Jones, Jon Owen (Cardiff C)
Prentice, Ms Bridget (Lewisham E)


Jones, Dr Lynne (Selly Oak)
Prentice, Gordon (Pendle)


Jones, Martyn (Clwyd S)
Prosser, Gwyn


Jowell, Rt Hon Ms Tessa
Purchase, Ken


Keen, Alan (Feltham & Heston)
Quinn, Lawrie


Kelly, Ms Ruth
Radice, Rt Hon Giles


Kemp, Fraser
Reed, Andrew (Loughborough)


Kennedy, Jane (Wavertree)
Roche, Mrs Barbara


Khabra, Piara S
Rooker, Rt Hon Jeff


Kilfoyle, Peter
Roy, Frank


King, Andy (Rugby & Kenilworth)
Ruddock, Joan


King, Ms Oona (Bethnal Green)
Russell, Bob (Colchester)


Kirkwood, Archy
Russell, Ms Christine (Chester)


Kumar, Dr Ashok
Ryan, Ms Joan


Ladyman, Dr Stephen
Salter, Martin


Laxton, Bob
Sarwar, Mohammad


Leslie, Christopher
Savidge, Malcolm


Lewis, Ivan (Bury S)
Sedgemore, Brian






Sheerman, Barry
Turner, Dennis (Wolverh'ton SE)


Sheldon, Rt Hon Robert
Turner, Dr Desmond (Kemptown)


Shipley, Ms Debra
Turner, Neil (Wigan)


Short, Rt Hon Clare
Twigg, Derek (Halton)


Simpson, Alan (Nottingham S)
Tynan, Bill


Singh, Marsha
Vaz, Keith


Skinner, Dennis
Walley, Ms Joan


Smith, Rt Hon Andrew (Oxford E)
Ward, Ms Claire


Smith, Angela (Basildon)
Watts, David


Smith, John (Glamorgan)
White, Brian


Smith, Llew (Blaenau Gwent)
Whitehead, Dr Alan


Snape, Peter
Wicks, Malcolm


Soley, Clive
Williams, Rt Hon Alan (Swansea W)


Southworth, MS Helen




Williams Mrs Betty (conwy)


Starkey, Dr Phyllis
Willis Phil


Steinberg, Gerry
Wilson, Brian


Stinchcombe, Paul
Winnick, David


Stoate, Dr Howard
Winterton, Ms Rosie (Doncaster C)


Stunell, Andrew
Wise, Audrey


Taylor, Ms Dari (Stockton S)
Wood, Mike


Temple-Morris, Peter
Woolas, Phil


Thomas, Gareth R (Harrow W)
Worthington, Tony


Timms, Stephen
Wray, James


Tipping, Paddy
Wright, Dr Tony (Cannock)


Todd, Mark



Touhig, Don
Tellers for the Ayes:


Trickett Jon
Mr. David Jamieson and


Truswell, Paul
Mr. Gerry Sutcliffe.


NOES


Ainsworth, Peter (E Surrey)
Hague, Rt Hon William


Amess, David
Hamilton, Rt Hon Sir Archie


Arbuthnot, Rt Hon James
Hammond, Philip


Baldry, Tony
Hawkins, Nick


Beggs, Roy
Hayes, John


Bercow, John
Heald, Oliver


Beresford, Sir Paul
Heathcoat-Amory, Rt Hon David


Blunt, Crispin
Hogg, Rt Hon Douglas


Boswell, Tim
Horam, John


Brady, Graham
Howard, Rt Hon Michael


Brazier, Julian
Howarth, Gerald (Aldershot)


Brooke, Rt Hon Peter
Hunter, Andrew


Browning, Mrs Angela
Jack, Rt Hon Michael


Bruce, Ian (S Dorset)
Jenkin, Bernard


Burns, Simon
Key, Robert


Butterfill, John
King, Rt Hon Tom (Bridgwater)


Cash, William
Kirkbride, Miss Julie


Chope, Christopher
Lait, Mrs Jacqui


Clark, Dr Michael (Rayleigh)
Leigh, Edward


Collins, Tim
Letwin, Oliver


Cran, James
Lewis, Dr Julian (New Forest E)


Curry, Rt Hon David
Lidington, David


Davies, Quentin (Grantham)
Lloyd, Rt Hon Sir Peter (Fareham)


Davis, Rt Hon David (Haltemprice)
Loughton, Tim


Day, Stephen
Luff, Peter


Donaldson, Jeffrey
Lyell, Rt Hon Sir Nicholas


Dorrell, Rt Hon Stephen
McIntosh, Miss Anne


Duncan Smith, Iain
MacKay, Rt Hon Andrew


Evans, Nigel
Maclean, Rt Hon David


Faber, David
McLoughlin, Patrick


Fabricant, Michael
Madel, Sir David


Fallon, Michael
Major, Rt Hon John


Right, Howard
May, Mrs Theresa


Forth, Rt Hon Eric
Moss, Malcolm


Fox, Dr Liam
Nicholls, Patrick


Fraser, Christopher
Norman, Archie


Gale, Roger
O'Brien, Stephen (Eddisbury)


Gibb, Nick
Paice, James


Gill, Christopher
Paterson, Owen


Gillan, Mrs Cheryl
Pickles, Eric


Gorman, Mrs Teresa
Portillo, Rt Hon Michael


Gray, James
Prior, David


Green, Damian
Redwood, Rt Hon John


Greenway, John
Robathan, Andrew


Grieve, Dominic
Robertson, Laurence





Roe, Mrs Marion (Broxbourne)
Taylor, Sir Teddy


Rowe, Andrew (Faversham)
Trend, Michael


St Aubyn, Nick
Tyrie, Andrew


Sayeed, Jonathan
Viggers, Peter


Shephard, Rt Hon Mrs Gillian
Walter, Robert


Shepherd, Richard
Waterson, Nigel


Smyth, Rev Martin (Belfast S)
Wells, Bowen


Soames, Nicholas
Whitney, Sir Raymond


Spelman, Mrs Caroline
Whittingdale, John


Spicer, Sir Michael
Widdecombe, Rt Hon Miss Ann


Spring, Richard
Willetts, David


Stanley, Rt Hon Sir John
Winterton, Mrs Ann (Congleton)


Steen, Anthony
Winterton, Nicholas (Macclesfield)


Streeter, Gary
Yeo, Tim


Swayne, Desmond
Young, Rt Hon Sir George


Syms, Robert



Tapsell, Sir Peter
Tellers for the Noes:


Taylor, Ian (Esher & Walton)
Mr. Keith Simpson and


Taylor, John M (Solihull)
Mr. John Randall.

Question accordingly agreed to.
Clause read a Second time, and added to Bill.

New Clause 28

CONSIDERATION BY COMPETITION COMMISSION

".—(1) If the Director—

(a) makes a report under section (Reports by Director General of Fair Trading)(2), or
(b) asks the Commission to consider a report that he has made under section (Reports by Director General of Fair Trading)(3),

the Commission must consider the matter.

(2) The Commission must then make its own report on the matter unless it considers that, as a result of a change of circumstances, no useful purpose would be served by a report.

(3) If the Commission decides in accordance with subsection (2) not to make a report, it must make a statement setting out the change of circumstances which resulted in that decision.

(4) A report made under this section must state whether, in the opinion of the Commission—

(a) the regulating provision or practice which is the subject of the report has a significant anti-competitive effect, or
(b) the regulating provisions or practices, or combination of regulating provisions and practices, which are the subject of the report have such an effect.

(5) A report under this section which states that, in the opinion of the Commission, there is a significant anti-competitive effect must also—

(a) state whether the Commission considers that that effect is justified; and
(b) if it states that the Commission considers that it is not justified, state its opinion as to the action, if any, that ought to be taken by the Authority.

(6) Subsection (7) applies whenever the Commission is considering, for the purposes of this section, whether a particular anti-competitive effect is justified.

(7) The Commission must ensure, so far as that is reasonably possible, that the conclusion it reaches is compatible with the functions conferred, and obligations imposed, on the Authority by or under this Act.

(8) A report under this section must contain such an account of the Commission's reasons for—

(a) any opinion which it has expressed in the report, and
(b) if it has reached a conclusion on whether a particular anti-competitive effect is justified, that conclusion,

as is expedient, in the opinion of the Commission, for facilitating proper understanding of that conclusion or opinion.

(9) Schedule (Role of Competition Commission) supplements this section.

(10) If the Commission makes a report under this section it must send a copy to the Treasury, the Authority and the Director.".—[Mr. Timms.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 29

ROLE OF THE TREASURY

".—(1) This section applies if the Competition Commission makes a report under section (Consideration by Competition Commission)(3) which states that in the opinion of the Commission there is a significant anti-competitive effect.

(2) If the Commission's opinion, as stated in the report, is that the anti-competitive effect is not justified, the Treasury must give a direction to the Authority requiring it to take such action as may be specified in the direction.

(3) But subsection (2) does not apply if the Treasury consider—

(a) that, as a result of action taken by the Authority in response to the Commission's report, it is unnecessary for them to give a direction; or
(b) that the exceptional circumstances of the case make it inappropriate or unnecessary for them to do so.

(4) In considering the action to be specified in a direction under subsection (2), the Treasury must have regard to any opinion expressed by the Commission when it complied with section (Consideration by Competition Commission)(5)(b).

(5) Subsection (6) applies if—

(a) the Commission's conclusion, as stated in its report, is that the anti-competitive effect is justified; but
(b) the Treasury consider that the exceptional circumstances of the case require them to act.

(6) The Treasury may give a direction to the Authority requiring it to take such action—

(a) as they consider to be necessary in the light of the exceptional circumstances of the case; and
(b) as may be specified in the direction.

(7) The Authority may not be required as a result of this section to take any action—

(a) that it would not have power to take in the absence of a direction under this section; or
(b) that would otherwise be incompatible with any of the functions conferred, or obligations imposed, on it by or under this Act.

(8) Subsection (9) applies if the Treasury are considering—

(a) whether subsection (2) applies and, if so, what action is to be specified in a direction under that subsection; or
(b) whether to give a direction under subsection (6).

(9) The Treasury must—

(a) do what they consider appropriate to allow the Authority, and any other person appearing to the Treasury to be affected, an opportunity to make representations; and
(b) have regard to any such representations.

(10) If, in reliance on subsection (3)(a) or (b), the Treasury decline to act under subsection (2), they must make a statement to that effect, giving their reasons.

(11) If the Treasury give a direction under this section they must make a statement giving—

(a) details of the direction; and
(b) if the direction is given under subsection (6), their reasons for giving it.

(12) The Treasury must—

(a) publish any statement made under this section in the way appearing to them best calculated to bring it to the attention of the public; and
(b) lay a copy of it before Parliament.".—[Mr. Timms.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 32

MISLEADING THE DIRECTOR GENERAL OF FAIR TRADING

. Section 44 of the Competition Act 1998 (offences connected with the provision of false or misleading information) applies in relation to any function of the Director General of Fair Trading under this Act as if it were a function under Part I of that Act.".—[Mr. Timms.]
Brought up, read the First and Second time, and added to the Bill.

New Clause 1

RESTRICTIONS ON POWERS OF TREASURY

"(1) Where given power under this Act to make regulations or orders, the Treasury shall not exercise those powers so as to impose restrictions or requirements which are likely to have any of the relevant effects, except to the necessary extent, and shall disapply, limit or relax restrictions or requirements imposed by or under this Act so as to seek to ensure that they are likely to have the relevant effects only to the necessary extent.
(2) The relevant effects are: impairing, impeding, restricting or distorting competition or innovation.
(3) The necessary extent is: the extent necessary to protect actual or potential consumers and financial markets or exchanges or to maintain confidence in the financial system.
(4) Competition is: the international competitiveness of the United Kingdom, the financial system or UK persons and competition between authorised persons.
(5) 'Consumers' has the same meaning as in section 5.
(6) 'The financial system' has the same meaning as in section 3.
(7) 'UK person' means a person whose registered office (or, if he does not have a registered office, whose head office) is in the United Kingdom.".—[Mr. Heathcoat-Amory.]

Brought up, and read the First time.

Mr. Heathcoat-Amory: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Michael J. Martin): With this it will be convenient to discuss amendment No. 52, in clause 372, page 194, line 37, leave out—
other provision of this Act
and insert—
provision of this Act other than section (Restrictions on powers of Treasury).

Mr. Heathcoat-Amory: The new clause and amendment No. 52 are important because they would restrict the power of the Treasury. The Bill would subject the FSA to certain restrictions. As we have heard in a previous debate, the authority would be given objectives and principles to pursue and by which it would have to abide. However, those provisions would not be binding on the Treasury.
The Treasury has considerable powers under the Bill. In earlier debates, some Labour Members complained about the Treasury's power of appointment over certain


individuals and members of the authority itself. If those hon. Members believe that the Treasury should be constrained in the exercise of its powers, they have the chance to join us in supporting a new clause and an amendment that would do so.
The Treasury has major powers; for example, to grant exemptions under the financial promotion regime, and to specify what are regulated activities. Furthermore, it can exempt professional firms, such as lawyers and accountants, from the provisions of the Bill.
Those wide-ranging powers are best summed up and illustrated by clause 372, which is the subject of the new clause and the amendment. Clause 372 states:
The Treasury may by order make such incidental, consequential, transitional or supplemental provision as they consider necessary or expedient for the general purposes, or any particular purpose, of this Act or in consequence of any of its provisions or for giving full effect to it.
That is a Henry VIII clause. The Treasury is given the power to alter primary legislation by the use of orders.
We have debated the inadequacy of the scrutiny of the House in respect of such orders, so it is important further to constrain the Treasury in that regard. Even Henry VIII would have been jealous of clause 372. Henry VIII clauses are so called because in 1539 Parliament passed the Act of Proclamations, which authorised the use of proclamations as an alternative to statute law. I do not know the circumstances in which that Act was passed. I imagine that Parliament felt it was better to regulate matters in some way, even though it could hardly have approved of that exercise of authority by the king.
Proclamations issued by the king were always fairly minor and never affected life or property, whereas the orders that can be brought forward under the Bill may affect property in the form of people's money and investments. Proclamations in the middle ages were generally not enforced or the courts were reluctant to enforce them, whereas the Bill will be rigorously enforced. [Interruption.]

Mr. Deputy Speaker: Order. There is a great deal of private conversation in the Chamber and beyond the Bar of the House. Perhaps hon. Members will come to order and allow the right hon. Gentleman to continue.

Mr. Heathcoat-Amory: Clause 372 goes wider than any of the powers available to Henry VIII. It is important that the House wakes up to the potential for, if not abuse, at least the possibility that this primary legislation could be altered by orders and statutory instruments in a way that goes entirely unscrutinised.
New clause 1 makes it clear that orders must not restrict competition beyond protecting consumers or pursuing the Bill's other objectives. That would be a useful counterbalance to the inevitable tendency of all regulators to over-regulate and of all regulatory systems to end up with excessive costs and regulation. The Government were reluctant to accept any of our earlier amendments for elevating competition to one of the Bill's objectives. This proposal is a useful alternative and I commend it to the House.

Mr. Timms: I understand the thinking behind new clause 1 and have some sympathy with what it seeks

to achieve. It is certainly not our practice or intention to make regulations that would in any way damage competition, competitiveness or innovation.
There are a number of difficulties with new clause 1. At the heart of the problem is that its effect could not be determined until the Bill's powers were exercised. The European Union has some jurisdiction over matters covered by the Bill. Much of the Bill, to a greater or lesser extent, delivers on or is constrained by EU directives and treaties. We are required, for example, to bring within the scope of regulation any activities covered by insurance directives—life and non-life—that are undertaken by qualifying institutions. The same is true of investment and banking. We have no choice in the matter, so the new clause could cause difficulties.
Another example is where the purpose of the regulations might not properly be described as protecting consumers or maintaining confidence, but there was some other good reason for proceeding. The most obvious example is exercising powers in a way consistent with the FSA's objectives under the Bill that would prevent financial services business in the UK being used in connection with financial crime. That is not provided for in the new clause.
The right hon. Member for Wells (Mr. Heathcoat-Amory) referred to the breadth of clause 372, but his fears are not well founded. It is clear that the power is to make
incidental, consequential, transitional and supplemental provision
to deal with minor things where it is necessary or expedient for the purposes of the Bill, or to give effect to it. I do not agree that Henry VIII would have been envious of that power, as the right hon. Gentleman suggested.

Mr. Tyrie: Will the Minister give way?

Mr. Timms: No, I must press on.
I hope that I have been able to set out some of the difficulties with the Opposition's proposal. The Bill has been carefully formulated to ensure that the extent of the Treasury's powers is clear. It is not our intention to impose any more burdens on firms than is necessary, and wherever possible, we consult on proposals to make regulations so that those affected by them have an opportunity to comment on and influence them. The powers in the Bill are no different from the order and regulation powers under any other Act of Parliament, and I hope that that gives Opposition Members the reassurances that they seek.

Mr. Flight: The House may not be aware that the Bill, which proposes to set up and empower the FSA, reserves important powers to the Treasury—the most important, perhaps, is designating what are to be authorised and regulated activities. However, the Treasury's powers to exempt matters concerning promotion will be important.
We have looked at how the Treasury powers interrelate to the objectives and principles of the Bill. Clause 1 has been worded so as to pick up the relevant references, and it deals, quite appropriately, with the principles of not damaging competition or innovation. Competition is defined as both domestic competition and international competitiveness, and the Bill picks up the key objectives where the Treasury has power.
We do not accept the Minister's argument concerning technical difficulties with subjecting the Treasury to the same basic objectives and principles relevant to


its powers, as those objectives and principles apply to the FSA. If the Minister has sympathy with the objectives, what other proposals do the Government have to address them? As things stand—particularly where items of secondary legislation are dealt with by negative resolution, rather than positive affirmation—there is no guarantee that what the Treasury does will stick within the objectives and principles.
The amendment proposes essentially to apply the terms of clause 1 to the Henry VIII clause—which, to some extent, may limit its powers, but would tie the two together. We feel that that would address some incomplete business within the Bill, which is unsatisfactory without it. The Government have come up with no other method of tying the Treasury in with the rest of the Bill. However, this is not a matter that we would wish to put to a vote. Rather, we would hope to see what the other place could do to tie in the matter in a way that the Government would find acceptable.
Unless the matter is addressed, the two matters do not tie together—we have the FSA bound by relevant objectives and principles, while the Treasury is not so bound.

Mr. Deputy Speaker: Does the right hon. Gentleman wish to withdraw the motion?

Mr. Heathcoat-Amory: I beg to ask leave to withdraw the motion.
Motion and clause, by leave withdrawn.
Further consideration adjourned.—[Mr. Sutcliffe.]
Bill, as amended in the Standing Committee, to be further considered tomorrow.

Orders of the Day — DELEGATED LEGISLATION

Mr. Deputy Speaker (Mr. Michael J. Martin): With permission, I shall put together the motions relating to delegated legislation.
Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

LOCAL GOVERNMENT FINANCE

That the Local Government Finance (England) Special Grant Report (No. 49) on the 1999/2000 Special Grant for Kosovan Evacuees (House of Commons Paper No. 115), which was laid before this House on 20th December, be approved.

LOCAL GOVERNMENT

That the draft Local Government Best Value (Exemption) (England) Order 2000, which was laid before this House on 11th January, be approved.—[Mr. Sutcliffe.]
Question agreed to.

Orders of the Day — BUSINESS OF THE HOUSE

Ordered,
That for the remainder of the present session, the Order [24th May 1999] relating to sittings in Westminster Hall shall have effect with the addition at the end of the paragraph (4) of the following words—
(4A) Any member of the Chairmen's Panel may also take the chair at a sitting in Westminster Hall when so requested by the Chairman of Ways and Means, with the duties and powers conferred by that order on additional Deputy Speakers; and Members so appointed shall be addressed by name."—[Mr. Sutcliffe.]

Orders of the Day — Police Complaints (Civilian Employees)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sutcliffe.]

Sir John Stanley: As the House knows, there are two separate systems for the investigation of complaints against the police by members of the public. If the complaint is against a uniformed police officer, the statutory police complaints procedure comes into operation with independent supervision provided by the Police Complaints Authority. However, if the complaint involves a civilian employee of a police force—though the complaint will be investigated through the internal procedures of the police force in question—there is no statutory procedure and no statutory independent supervision. The fact that two separate systems run together can lead to serious shortcomings for members of the public. Such serious shortcomings have been graphically revealed in the tragic circumstances of my constituent, Mrs. Alexander.
On 20 July 1998, Mrs. Alexander's husband was a passenger in a car that went off the road, smashed through railings and ended up in a field. Mr. Alexander tragically died from the injuries that he sustained in the accident. Thames Valley police, in whose area the accident occurred, carried out its usual full investigation and submitted its report to the Crown Prosecution Service in November of that year. There was no other vehicle involved in the accident, and because of the death of Mr. Alexander and the absence of any other independent witness, the Crown Prosecution Service concluded that the only charge that it could make against the driver of the car in which Mr. Alexander had been a passenger was that of driving without due care and attention. That was the only charge that it judged to have a reasonable prospect of a conviction.
Under current legislation, a summons for driving without due care and attention must be served within six months of the date of the offence. As the then Attorney-General, Sir John Morris, confirmed to me, there is no provision in current legislation for extending the six-month deadline in any circumstances, however extenuating. That is a matter that the Government should reconsider in the light of Mrs. Alexander's case and perhaps of others.
With the accident occurring on 20 July 1998, the Thames Valley police had until 20 January 1999 to serve the summons. As the then Attorney-General informed me, the Crown Prosecution Service notified Thames Valley police of its decision to prosecute the driver for driving without due care and attention on 10 December 1998. That decision was further confirmed orally by the CPS to the Thames Valley police on 18 December of that year. However, by the time the file returned—
It being Seven o'clock, the motion for the Adjournment of the House lapsed, without Question put.
Motion made, and Question proposed, That this House do now Adjourn.—[Mr. Sutcliffe.]

Sir John Stanley: By the time the file returned to the CPS, on 27 January 1999, the statutory deadline of 20 January had passed and Thames Valley police had failed to issue the relevant summons. As a result of that

failure, the intended prosecution of the driver of the car in which Mr. Alexander had been killed could no longer take place.
With every possible justification, Mrs. Alexander made a formal complaint against Thames Valley police. She also came to see me, and I took up her case with all the parties involved. Finally, in a letter dated 12 July 1999, the chairman of the Thames Valley police authority, Mr. Glenn Maybury, confirmed to me the source of the mistake that had occurred within the police force:
You are indeed correct in stating that 'the mistakes' were committed by a civilian member of staff and that the statutory police complaints procedure does not apply to complaints against civilians.
A terrible sequence of events means that Mrs. Alexander and her 15-year-old daughter have suffered three successive losses. First, and most tragic of all, is that Mrs. Alexander has lost her husband and her daughter has lost her father.
Secondly, because of "serious mistakes" made within the Thames Valley police force, acknowledged in writing by the chairman of the police authority, Mrs. Alexander has lost the due process of criminal proceedings taking place against the driver of the car in which her husband was killed.
Thirdly, because the mistakes were committed by a civilian employee of the police force, Mrs. Alexander has lost access to the statutory police complaints procedure, with its statutory independent supervision. That is a truly appalling catalogue of events. I know that the Minister will join me in expressing heartfelt and deepest sympathy with Mrs. Alexander and her daughter for all that they have had to bear since the death of Mr. Alexander.
There is nothing new about the unsatisfactory outcome that can arise, owing to the statutory police complaints procedure not currently extending to the civilian staff of police forces. When the Select Committee on Home Affairs conducted an inquiry, "Police Disciplinary and Complaints Procedures", in the 1997–98 Session, the Police Complaints Authority, in its memorandum to the Committee, called for an extension of its remit to cover civilians. Paragraph 85 of its memorandum states:
Since the policy of civilianisation is unlikely to be reversed, the Authority believes that there should be some independent oversight of complaints against civilians carrying out tasks previously performed by police officers. We have therefore suggested that where the complaint, if substantiated, would involve a breach of the police discipline code or the PACE codes of practice, the Authority should review the matter and satisfy itself that the action proposed by the force was appropriate. This would provide an element of reassurance without unduly interfering in civilian personnel management.
Like the Police Complaints Authority, I, too, believe that there is a compelling case for extending the PCA's statutory remit to the civilian staff of police forces in the way in which the authority has proposed. I take that view for the following reasons. First, I am in no doubt that the public have much greater confidence in an investigation into a complaint against a police force if an independent element in that investigation is ensured by law, as would most certainly be the case if the PCA's proposal was implemented. I am glad that in its memorandum to the Select Committee on Home Affairs the Home Office acknowledged the importance of the public confidence factor. At paragraph 45 the Home Office stated:
Although the police take any complaint seriously, the internal investigation process for a civilian employee may not command the same public confidence as the statutory police complaints procedure involving the PCA.


Interestingly, the Home Office stated in the same paragraph:
The PCA's remit may need to be reviewed if there is a continuing shift of police duties to civilian employees and contracted out staff and if police services operated by local authorities become more prevalent.
The second reason for extending the PCA's remit to cover civilian staff is to ensure consistency for the public when making complaints between one police force and another. In Mrs. Alexander's case, if the accident had happened in a different location and the investigation was therefore carried out by another police force, the failure to issue the summons could well have been the responsibility of a police officer rather than a civilian. In that case, Mrs. Alexander would have been able to have an independent statutory investigation of her complaint. That inconsistency was indeed acknowledged by the Home Office in its memorandum to the Select Committee. At paragraph 44 it stated:
Indeed, members of the public in the same situation may be dealt with by police civilian employees in one force when, were they in another force area, they would be dealt with by police officers. Only in the latter case, if they are unhappy with their treatment, would they have recourse to the statutory police complaints system.
I put it to the Minister that it surely cannot be right in a matter as important as the public's right to have complaints against the police investigated that it is now becoming almost a complete lottery, in the non-operational areas of police activity, as to whether the individual making a complaint gets an independent and statutory investigation. It depends solely on whether the particular post which has been the subject of the complaint happens to be filled by a police officer in uniform or by a civilian employee.
My final reason for wanting to see the PCA's remit extended to civilians is that the problem is bound to get worse if action is not taken. The civilianisation of non-operational posts is certain to continue for financial reasons alone. The Minister of State, Home Office the hon. Member for Norwich, South (Mr. Clarke) told me as much in a written answer:
It is my policy to encourage authorities and chief officers to make efficient and effective use of staff resources. Police authorities have been required to plan and deliver efficiency gains of 2 per cent. year on year between 1999–2002. Efficiency gains totalling £440 million will be redeployed to support front-line policing. Civilianisation of non-operational posts can play a key role in releasing resources for operational work."—[Official Report, 18 January 2000; Vol. 342, c.375W.]
There is no doubt in my mind that the civilianisation process will be extended. That is clearly the Government's policy. The serious difficulties that I am highlighting in the debate will, therefore, increase if action is not taken.
As the Minister knows, I pursued with the Home Secretary last year the issues raised for police complaints procedures by Mrs. Alexander's case. The Minister of State, Home Office, replied to me on 5 August, as follows:
Although there are no plans at present to extend the scope of the procedures to include civilians, the Government has accepted the Police Complaints Authority's view, expressed to the Home Affairs Select Committee, that its remit should be reviewed if there is a continuing shift of police duties to civilian employees.
That reply was somewhat disappointing, because the Government should move on from taking no action and simply making an undertaking to review the position. The

Government should change their position and accept the PCA's proposal to extend its remit to the civilian staff of police forces.
Mrs. Alexander's tragic and deeply disturbing case could not provide a more compelling justification for the change that I seek.

The Parliamentary Under-Secretary of State for the Home Department (Mr. Mike O'Brien): I join the right hon. Member for Tonbridge and Mailing (Sir J. Stanley) in extending my condolences and those of the Government to Mrs. Alexander and her 15-year-old daughter for the tragic circumstances that have obtained in the case that we are discussing. It is regrettable that, through a series of administrative bungles, those circumstances have developed to the point where the right hon. Gentleman feels obliged to bring the case to the attention of the House. He is right to do that because the case raises some worrying points.
The right hon. Gentleman knows that I have examined the case only recently. It appears that one person was not exclusively at fault and that a series of apparently minor administrative errors, taken together, led to an outcome that simply was not good enough. Mrs. Alexander, and all members of the public, have a right to expect better. I express my regrets, and the deep regrets of Thames Valley police, for the errors that were committed. It is unfortunate that those errors were associated with such a serious and tragic incident. I can understand Helen Alexander's frustrations, anger and great distress, which are best expressed in her letter of 21 May. In her circumstances, I would feel exactly the same.
The right hon. Gentleman raised several issues, and I shall try to deal with some of them. The six-month deadline and whether it should be extended is a difficult consideration, especially with regard to the sort of offences that we are considering. It is wrong to allow something to hang over people for a long time, but a time limit-is quickly eaten up by prolonged investigation and examination of papers. Perhaps I should discuss that with the Minister of State, Home Office, my hon. Friend the Member for Norwich, South (Mr. Clarke), who is responsible for the issues relating to the time limit, and ask him to write to the right hon. Gentleman, who may pass on to Mrs. Alexander his views on the prospects for looking at the matter.
The force investigated the concerns and I understand that steps have been taken in respect of the staff involved. I am informed that it acknowledged the issue from the outset and has taken steps to prevent any recurrence. Even if a more formalised procedure had been enshrined in legislation, it is unlikely that the outcome would have been different from that which resulted from the force's application of its own procedures. The mistakes were minor and administrative, but their conjunction produced an unacceptable outcome.
I understand that there has been a protracted correspondence, but am not sure whether that has not added to the frustration. I am asked to convey the fact that the force, having acknowledged its faults, has tried to explain itself as best it can. Nothing, however, will ever be sufficient to make Mrs. Alexander feel that she has been treated fairly, because obviously the outcome means that her grievance is in many ways justifiable.
The right hon. Gentleman raised the broader policy issue of the complaints procedure in respect of civilian employees of police forces. Let me deal with that. The accountability and integrity of the police are paramount and we have a valuable opportunity to consider them. When mistakes are made—whether by police or by civilian support staff—it is essential that the service acknowledges them and ensures, so far as it is able, that appropriate action is taken to make sure that they are not repeated. That action must be taken not only in respect of those deemed to be responsible, but to ensure that outside parties are contacted so that they do not repeat their mistakes. There was some discussion with the Crown Prosecution Service. All this has taken some time. Although no one seeks to shift blame, we need to ensure that all the angles are considered. Where there was any slowness, it must be addressed.
Confidence in the police and their handling of complaints is essential and depends on their willingness to respond positively to mistakes and address any issues identified. The right hon. Gentleman is right that the proportion of civilians employed by the police has gradually increased since the late 1980s. As forces have driven towards greater efficiency, they have created civilian police posts by recognising that roles can be undertaken by civilians, thereby releasing trained and skilled police officers for operational duties. Like the previous Government, we take the view that there is a proper role for civilians in the police. Generally, roles undertaken by civilians are non-operational. Civilians are not in direct contact with the public and certainly do not exercise the statutory powers of a police officer.
The complaints procedure for the police is special. It has a broader application, but essentially the Police Complaints Authority becomes involved when the police may have gone beyond the expectations of ordinary individuals when exercising their powers. People need a particular assurance that no breach or abuse has occurred. That is the PCA's key role, or certainly was before all the civilian posts were created.
The move towards civilianisation has been encouraged and as a result civilian support staff within the police service represent on average 30 per cent. of force establishments. Clearly, with that number of civilian members of staff within the police service there will be occasions when complaints may be made in respect of them. If such complaints allege criminal conduct, they can be dealt with no differently from those of police colleagues in that a criminal investigation will be undertaken. However, where the complaint is of a non-criminal nature—an administrative error—unlike for their police colleagues, there are no procedures covered by legislation.
The Police Act 1996 covers complaints against the police, and the Police (Conduct) Regulations 1999 cover discipline procedures. Although procedures for complaints against civilian employees of police forces are neither covered by, nor required by, legislation, forces have developed their own codes of conduct and procedures for handling such complaints. Although they are not identical to those affecting police colleagues, they are similar in many respects. Force codes of conduct, for example, would embrace the principles contained within legislation covering employment law, equality of opportunity,

discrimination, harassment and similar matters, as forces develop their own policies and procedures for the handling of complaints.
When forces receive complaints in respect of the conduct of civilian staff members they would normally be investigated. Depending upon the severity of the allegation and force policy, the investigator would be either a police officer or a civilian manager of a higher grade than the person about whom the complaint was made. The force complaints and discipline department which ordinarily undertakes the role of investigating complaints in respect of police officers also takes on the role of investigating complaints in respect of civilian staff members, particularly where the allegations are serious or the complaint also involves a police officer.
Where an investigation establishes that there is a case to answer, the severity of the complaint also determines how it is dealt with. Minor complaints are likely to be dealt with at a local level by line managers, perhaps by verbal advice or warnings, whereas more serious issues, perhaps amounting to gross misconduct, may lead to formal hearings with appropriate representation for the individuals complained about who may face sanctions which would include dismissal.
Unfortunately, complaints by definition mean that an individual or individuals are often, but not always, dissatisfied with the course of action taken. Regardless of how fair, impartial or open the process may be, there can never be any guarantees of satisfaction with the outcome of an investigation.
Expectations of complainants will invariably be linked to their perceptions of severity, often linked to the particular circumstances of their case. In this case the circumstances were obviously tragic. Errors and mistakes made by staff, even minor ones, are often not confined to one particular individual. Yet the expectation of complainants can be to see severe punishment imposed on individuals. That is more likely where errors, albeit minor ones, are associated with serious cases. Where someone is rightfully angry and upset they may well feel that the errors committed should be recognised much more forcefully. That is understandable. Clearly, in those cases where serious misconduct is established, one would expect appropriate levels of punishment to reflect the case.
That is not always the situation. The errors are not always great, even though the consequences of them may be serious. In such circumstances it becomes difficult for individuals to feel that they have been dealt with fairly. Someone may have received a reprimand or been disciplined according to internal discipline procedures for what on the face of it—the way in which they conducted their job—has been an administrative error but which may have been much more serious for the person who had to bear the consequences of it. There may well be a feeling that what ought to have been done has not been done. It is particularly galling where an individual has had to face those consequences and perhaps does not feel entirely happy that all the circumstances have been revealed. In such circumstances, again, it is understandable that people still feel angry and expect better.

Sir John Stanley: I am sure that, in the closing minutes of the debate, the Minister will wish to deal with the


central issue: whether the Government will now accept the proposal for the extension of the PCA's remit to civilians in the way that the PCA has proposed.

Mr. O'Brien: We will look at the points that the right hon. Gentleman has raised, but we have examined the matter and, so far, very few requests have been made for that extension. The view expressed to us is that there is insufficient cause to consider legislation to bring civilians within the independent police complaints procedure.
I would be happy to look at the issues that have been raised and discuss them with my hon. Friend the Member for Norwich, South, who is directly responsible for those issues, but the independent complaints procedure was set up to deal with the application of the police's extra powers. Therefore, there should be an independent mechanism to ensure that there is no abuse in their application. A civilian who may be acting as part of a police authority and performing a role on behalf of the police normally does not exercise those powers. Civilians are not expected to do so. Therefore, the procedures to deal with them as employees rather than as police officers are probably appropriate.
On a wider issue, there is a case for saying that there should be more standard procedures in different police forces to deal with civilians, particularly where those civilians have been engaged in administrative tasks that have affected the outcome of a legal procedure. Whether that needs to involve the independent police complaints process is a separate issue.
I do not want to say a complete no and to stonewall, particularly in a case such as the one that the right hon. Gentleman has raised. I will draw the issues to the attention of the Minister and, indeed, to my right hon. Friend the Home Secretary, but the way in which the issue has developed so far has not produced great demand for civilians to be brought within the police complaints authority procedure. The right hon. Gentleman will no doubt regret that, but that appears to be the state of play.

Sir John Stanley: I am grateful to the Minister for saying that he will consider the matter further. Given the ambit of the local government ombudsman, health service ombudsman and so on, is it not true that the civilian employees of police authorities are almost the only people at local level with regard to whom there is no independent and properly accountable recourse if members of the public have complaints of maladministration?

Mr. O'Brien: We will need to consider that point. When bringing the right hon. Gentleman's views and those of his constituents to the Home Secretary's attention, I will ensure that that issue is raised. All I can say is that, at this juncture, it has not produced the need for change. However, the arguments that he has put are worthy of full and proper consideration by Ministers and by the Government. I am anxious, and he will understand the reasons—

The motion having been made at Seven o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Seven o'clock.